Commentators warned that Mr Villepin’s political future could be at stake as he prepares for his toughest test since taking office last June.
The prime minister appeared on the main evening television news to explain his backing for the First Employment Contract (CPE) which has as its centerpiece, a two-year contract for under 26-year-olds that can be terminated by employers without legal recourse.
"I say this evening that the law which has been voted through will be put into effect, but I also hope... to complement the guarantees which are already there with new guarantees which will have to be negotiated with the social partners," he said.
50 percent youth unemployment
The prime minister claims that the CPE was a vital tool to combat youth unemployment, which is as high as 50 percent in run-down out-of-city areas hit by last November's riots.
"As head of government is it seriously possible for me not to take account of this situation of insecurity for young people, which has been getting worse now for 20 years? Can we sit there without doing something in response?" he asked.
By giving companies extra flexibility the contract is meant to encourage them to hire more young people, but left-wing opponents say it will be used by unscrupulous employers to replace full-time contracts and add to job insecurity.
Hundreds of thousands of students and workers have marched through the streets of Paris and there have been buildings occupied, strikes and sit-ins at more than half of France's 85 universities.
On Satuday riot police used force to evacuate the Sorbonne University in the Latin Quarter of Paris, center of the May 1968 disturbances, which had been taken over by some 300 students.
Mr Villepin, who has been tipped as a candidate to replace President Jacques Chriac in next year's elections, has seen his poll ratings plunge in recent weeks after a long political honeymoon.
Trade unions and students are planning three more days of demonstrations on Tuesday, Thursday and Saturday, and the opposition Socialists are finding the CPE a rare chance to unite against the government.
Villepin aloof
As result France’s political commentators see Mr Villepin as being further undermined by mutterings within his own camp.
Sunday's newspapers carried anonymous remarks from senior members of the ruling Union for a Popular Movement (UMP), criticising the 52-year-old prime minister, for his aloof style.
"Hatred of Villepin is going to become the most popular sport on the right," an unnamed minister told Le Parisien, whose article on the crisis was headlined "Villepin's future at stake".
The CPE row has come on top of a series of other difficulties for Mr Villepin.
The include the bird flu scare, the embarrassing recall of the decommissioned aircraft carrier the Clemenceau from India on environmental grounds, and a parliamentary debacle over attempts to regulate file-sharing by Internet.