PARIS - French unions and students are to take to the streets on Tuesday in what amounts to a victory parade after President Jacques Chirac pronounced dead a hated youth jobs law that has sparked mass protests and periodic unrest.

Union leaders toasted Monday's victory with champagne but vowed to remain on their guard until new measures replacing the First Job Contract (CPE) had become law.

However, they refrained from calling for fresh action against government labour policies.

With Easter holidays and examinations fast approaching, some students began voting on Monday to return to their studies, including at Rennes II university in western France which was the first faculty to strike over the CPE in February.

Satisfied protest leaders were nevertheless cautious.

"We are calling for the pressure to be kept up until parliament votes the repeal of the CPE, including by blocking universities if necessary," Bruno Julliard, head of the Unef students' union, told Reuters.

Tuesday's nationwide rallies will be the first test of sentiment after Chirac said on Monday the CPE would be replaced by measures to help disadvantaged young people find work.

His statement carefully avoided the words "withdrawal" or "repeal" to spare the blushes of the CPE's main champion, Prime Minister Dominique de Villepin, but some of its opponents hinted the battle was not yet over.

The head of the CGT union Bernard Thibault said he wanted to focus on the CNE job contract which, like the now defunct CPE, allows employers in very small firms to hire and fire people under 26 at will during a two-year trial period.

The crisis has shredded Villepin's authority, all but killed off his undeclared presidential ambitions, temporarily united the fractious leftwing opposition and split the ruling Union for a Popular Movement (UMP) now fearful of elections next year.

Interior Minister Nicolas Sarkozy, the UMP leader and Villepin's main conservative rival for 2007 presidential elections, said he hoped the CPE row did not spell the end of hopes for reform in France.

"I would not want the idea of reform now to be carried off by this unfortunate affair," he told the Le Figaro in an interview published on Tuesday.

In a front page editorial, the La Croix daily newspaper said that with presidential and parliamentary elections due in about one year there was little chance right and left would sit around a table to discuss how to cure youth unemployment of 22 per cent.

But some good could yet come of the crisis the paper said, adding: "These next 12 months could be useful if the CPE crisis ... forces each candidate (for the presidency) to make proposals on all the issues that have arisen in this debate."

- REUTERS