Sarkozy presses on with reform 

French President Nicolas Sarkozy has launched another season of reform, reconvening ministers ahead of a raft of new measures to deal with voter discontent over a slowing economy and declining spending power.

The cabinet met after a summer break marked by grim news from data that showed the French economy shrinking in the second quarter to the deaths of 10 French soldiers in Afghanistan earlier this week.

Sarkozy bolstered his international profile during the break with shuttle diplomacy between Moscow and Tbilisi to try and resolve the Georgian crisis.

But at home voters are more concerned about his failure to raise their spending power.

Ministers rejected talk of recession after data showed a week ago that gross domestic product contracted by 0.3 percent in the second quarter. But the economic slowdown will not help Sarkozy improve his low popularity ratings.

The cabinet meeting was kept short as Sarkozy and his ministers were due to take part in a ceremony to honour the soldiers killed in Afghanistan. The main announcement was that there would be a debate in parliament on France's military presence in Afghanistan.

The government has set itself and parliament a busy schedule in the weeks ahead, with several bills coming up for debate on topics as diverse as profit-sharing schemes, social security funding, education and prison reform.

Sarkozy will be keen to highlight those bills aimed at addressing the persistent problem of declining purchasing power - the number one concern of voters according to opinion polls.

One bill seeks to encourage small and medium firms to come up with profit-sharing plans for employees by introducing tax breaks on such schemes. But employers' groups have already complained that a separately announced tax hike would undermine the new measure.

Also on the agenda is a bill called the Active Solidarity Revenue which is designed to increase incentives for unemployed people to go back to work by allowing them to keep receiving some of their benefits when they get jobs.

Under the current system, some unemployed people are reluctant to take jobs because they fear they will be less well off than on benefits.

But the bill, championed by a former charity boss drafted into the cabinet to combat poverty, faces resistance even from within the government with the finance ministry in particular worried about the cost of implementing the measure.

Paris was rapped on the knuckles by the European Commission in May over the poor state of its public finances and Economy Minister Christine Lagarde is keen to limit new spending in order to meet France's promise to balance its budget by 2012.