France Telecom may need to cut up to 10% of its workforce to tackle its debts, according to a report in the French newspaper Le Figaro.

The paper said that between 10,000 and 11,000 jobs could go at the phone firm, though it did not say who its sources were.

Meanwhile, union delegates on France Telecom's board have called for the re-nationalisation of the company, a day after it appointed a new chief executive to come up with a rescue plan.

France Telecom, thought to be the world's most debt-laden company, picked Thierry Breton as its new boss in the hope he can reproduce his success as chief executive of Thomson Multimedia.

Investors cut short celebration

On the Paris stock market, France Telecom's shares fell more than 4% on Thursday morning to 8.07 euros as investor enthusiasm for new boss gave way to anxiety about the scale of the problems he must tackle.

The staff of France Telecom are living this very badly, they've suffered for five years

Monique Biot

Mr Breton has said he will conduct a review of all France Telecom's operations so that he can "rapidly define and implement solutions to loosen the financial grip in which France Telecom is now caught".

France Telecom has debts of 70bn euros (�43.9bn; $68.7bn) and its latest half-year loss topped 12bn euros.

Its creditors have yet to agree to roll over 15bn euros of debt due for repayment in 2003.

Worst fears

France Telecom's troubles stem from an spending spree in the late 1990s, when it built up interests across Europe, including the successful Orange mobile phone firm and struggling German operator MobilCom.

It has pulled the plug on funding MobilCom, but Mr Breton must still decide what to do about its 28.5% stake in the German firm, which is surviving on taxpayers' money and creditors' goodwill.

Seven trade union delegates sit on France Telecom's board, including two from the CGT union federation, which has links to the French Communist Party.

If the company was not state-controlled it would already be in liquidation

Elie Cohen, economist

They have both called for re-nationalisation, saying their worst fears about privatisation had been realised.

"We said it would trigger the clash we are now confronted with. The staff of France Telecom are living this very badly, they've suffered for five years," CGT member Monique Biot told the Europe One radio station.

The privatisation process has already cost taxpayers a lot...we think France Telecom must be seen in another light," said her CGT colleague Jean-Michel Gaveau.

"The liberal approach at European level needs to be reconsidered...We want public reappropriation."

Still a state firm?

The French government still holds a 55% stake in France Telecom and Mr Breton's appointment received cabinet approval.

Analysts also believe the French government has an important role to play in France Telecom's future.

"If the company was not state-controlled it would already be in liquidation," said Elie Cohen, an economist and ex-France Telecom board member in a television interview.

So far, the unions have given a cautious welcome to Mr Breton's appointment.

"He seems at first sight....someone good, for the moment," said Mr Gaveau.

However, if Mr Breton does propose swinging job cuts, then media reports suggest his salary could become a target for union anger.

If press reports of a salary of up to 1.5m euros are correct, Mr Breton and is being paid at least five times the 279,000 euros given to his predecessor, Michel Bon.