French Prime Minister Lionel Jospin has reshuffled his cabinet after three years in office, vowing to continue with economic reform.

Mr Jospin has sacked finance minister Christian Sautter after only five months in office, replacing him with heavyweight former Prime Minister Laurent Fabius, the president of the National Assembly.

Mr Fabius said that France needed"growth with reform" which was "dynamic" and that "the state must know how to reform itself."

Mr Sautter, who took over from Dominque Strauss-Kahn in November after a business scandal in November, was facing opposition from trade unions and small businesses in his drive to reform the French taxation system.

His plans to streamline tax collection led to strikes by civil servants which have forced the French government to move the deadline for submitting tax returns by two weeks this year.

Reform momentum stalled

France has been enjoying a favourable economic climate in the past year, with strong growth leading to a growing budget surplus.

But the government has been criticised for being too slow to realise the size of the surplus, and to implement any tax cuts which might stimulate job creation.

Unemployment, which is nearly 10%, still remains the biggest problem for the economy, despite an attempt by the government to boost jobs by cutting the working week to 35 hours last spring - a move that sparked widespread opposition from business.

And attempts to reform the pension and health care system, to reduce the role of the state and introduce more private contributions, have run into fierce opposition from unions.

Mr Fabius will have a difficult balancing act maintaining the momentum for reform, while at the same time preserving the distinctive French approach to economic reform, with a higher degree of state involvement in industry than in most other countries in Europe.

Prime Minister Lionel Jospin recently clashed with UK Prime Minister Tony Blair at the EU's Lisbon summit over the need to protect existing national firms and workers from the ravages of global capitalism.