March 24 (Bloomberg) -- French Prime Minister Dominique de Villepin and union leaders failed to narrow their differences in their first talks over a disputed labor law that has provoked mounting protests and violence.

The labor law, known by its French acronym CPE, has become the most contentious issue faced by de Villepin in his 10 months as prime minister and has provoked student rallies and union protests. The law lets companies fire workers under 26 within the first two years of employment with little notice or severance. Union and student opposition to the contract was emboldened by a protest March 18, when 1.5 million people took to the streets. Unions plan a nationwide strike on March 28.

``The country is a situation of violence and we came here to show responsibility,'' said Francois Chereque, head of CFDT, France's largest union. ``The prime minister should make a gesture on his part: withdraw the CPE. We tried to explain the situation and I get the feeling he didn't understand.''

The prime minister met with unions for just over one hour, with both sides refusing to cede any ground. The unions say they will not hold talks with the government unless the law is revoked. De Villepin says the law is part of an effort to make the labor market more flexible to curb unemployment, which is 9.6 percent nationwide and 22.2 percent for the young. He has said he won't withdraw, suspend or change the law.

De Villepin, reading from a statement, called the meeting ``important.''

``It's a first step,'' he told reporters. ``Together we must find constructive solutions.''

Pressure Mounting

The standoff has provoked marches and protests that have ended in violence. Yesterday, smoke wafted around the Eiffel tower after rioters near Paris' Esplanade des Invalides burned cars and a shop. Police questioned 227 people, 80 of whom were detained after the third march in a week. About 60 people were injured including 27 officers, an official said. The offenders weren't involved in the student protest, a police official said.

Pressure has mounting on de Villepin to soften his stance, as the issue divides his ruling party, the Union for a Popular Movement, on concern the protests will bolster the opposition in the 2007 presidential election. Union leaders maintain that all talks are conditional on the withdrawal of the contract. De Villepin will meet with student unions tomorrow, Chereque said.

Two-thirds, or 66 percent, of French people want de Villepin to withdraw the CPE, according to a survey of 951 people by CSA on March 21-22. That's 2 percent less than an earlier poll on March 15-16. Both surveys were conducted for Le Parisien newspaper and gave no margin of error.

De Villepin has been criticized by rivals for a lack of consultation over the law, which he forced through parliament using special constitutional powers.

`Not Enough Dialogue'

``If there has been a misunderstanding, it's because we didn't have enough dialogue,'' Interior Minister Nicolas Sarkozy said in an interview with Paris Match yesterday. ``We have to make up for lost time.''

Speaking at the end of a European Union summit today in Brussels, President Jacques Chirac said the law ``must be applied.'' He called on de Villepin and the opposition groups ``to have the necessary negotiations, discussions in a spirit of openness and mutual understanding.''

He also said yesterday's violence was ``totally intolerable and unacceptable.''

Over 23,000 university students marched yesterday from Place d'Italie to Les Invalides, in central Paris, according to the police. France's largest student union, UNEF, said protesters were more than double that figure.

Student Rallies

A rally by hundreds of thousands of students March 16 ended in clashes with police after protesters threw stones at them and set fire to a kiosk as they were trying to break through barricades. Police fired tear gas and arrested 272 people. Courses at 59 universities out of the country's 84 are disrupted, according to the Education Ministry. The Sorbonne University, a symbol of the 1968 student movement, has been sealed off from the rest of the Latin Quarter.

``You can't govern against the people,'' Nadine Morano, a UMP lawmaker, told Le Parisien this week. ``One must have the humility to say: If the text is being misunderstood, I have to explain it better. We've got to get out of this standoff.''

Unions have called for a ``day of action'' on March 28 and protests have widened to state-owned companies, such as the national railway and the RATP, which manages the Paris subway, and companies such as Gaz de France SA and Electricite de France SA, which say they will join in the walkout.

``The prime minister, after two months of deafness, is realizing the gravity of the situation he has created in the country,'' said Julien Dray, a Socialist law maker and party spokesman, said yesterday.

To contact the reporter on this story: Gabriele Parussini in Paris at gparussini@bloomberg.net.

Last Updated: March 24, 2006 10:48 EST