The government shelved the proposed carbon tax, one of Sarkozy's key reforms, a day after the president replaced a top minister in a reshuffle after his UMP party's defeat by left-wing rivals in regional elections.

Hundreds of thousands of protesters marched in the streets and teachers, train drivers and other public workers stayed off work to protest job cuts and plans for pension reform.

The president has vowed to press on with changes to state pensions. But the carbon tax, a major plank of his environmental policy touted as France's leading contribution to anti-global warming efforts, was put on hold.

Prime Minister Francois Fillon said in a statement that the government still aimed to implement a carbon tax but this could only be done "in common with other European countries" and France would push the EU to take a common position.

The UMP leader in parliament, Jean-Francois Cope, said after a meeting with Fillon that the tax will not be introduced in July as planned "unless there is a European accord."

The plan would have made France the first big economy to tax harmful carbon emissions, aiming to encourage French consumers to stop wasting energy. But business lobbies feared it would penalise French industry.

Fillon said the tax would have to work at a European level so as "not to harm the competitiveness of French companies," according several UMP deputies who met with him in parliament.

"The decisions we take on sustainable development must be better coordinated with all European countries so as not to deepen our competitive disadvantage with our neighbour Germany," they quoted him as saying.

The strikes on Tuesday disrupted train services and schools while angry public sector employees marched in Paris, Marseille, Bordeaux and other French cities, police and organisers said.

France's biggest union, the CGT, said 800,000 people took part in protest marches held in dozens of cities across the country, while police put the figure at 380,000.

"The issue is getting new direction in economic and social policies," said CGT leader Bernard Thibault, calling on Sarkozy to chart a new course in tackling unemployment and falling living standards.

Francois Chereque, head of the CFDT union, said French workers are increasingly feeling "abandoned" by Sarkozy's government. "The government must change its methods," he said.

Many union activists oppose Sarkozy's plan to raise the minimum legal age for a retirement pension from 60, possibly to 62. The government argues this is the only way to keep the system of generous state benefits afloat.

On Monday Sarkozy sacked Labour Minister Xavier Darcos, replacing him with Eric Woerth, the new pointman on pensions reform.

Speaking on television Tuesday, Woerth promised a "fair" reform of what he called France's "extraordinarily fragile" pensions system.

Sarkozy was elected in 2007 on promises to boost France's economy and get people back to work, but last year's recession has driven unemployment up to 10 percent, its highest level in a decade.

Many observers saw Sunday's electoral defeat for the government as a verdict both on Sarkozy's policies and his style. The Socialist-led opposition beat the UMP by 54 to 36 percent.

"We must examine the situation with much humility and change what needs changing," Fillon said on Tuesday, but insisted that he and Sarkozy "will not compromise on the need to modernise our country."

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