GM accounted for around half of Delphi's $29 billion in revenues in 2004. The world's largest automaker already is struggling with declining U.S. market share and spiraling costs and is in the midst of its own restructuring. But a strike would hurt other companies and smaller suppliers as well, since Delphi supplies every major automaker, including Ford Motor Co. and Nissan Motor Co.

"We disagree with Delphi's approach, but we anticipated that this step might be taken," Rick Wagoner, GM's chairman and chief executive officer, said in a statement. "GM expects Delphi to honor its public commitments to avoid any disruption to GM operations."

GM said it will continue negotiating with Delphi and its unions. But the United Auto Workers blasted the move and said it could stall talks.

"Indeed, today it appears there is no basis for continuing discussions," the UAW said in a statement.

GM shares fell 42 cents, or 2 percent, to $20.64 in morning trading on the New York Stock Exchange, while Ford lost 12 cents to $8.04. Nissan's U.S. shares lost 31 cents to $23.74 on the Nasdaq Stock Market.

Delphi, the largest U.S. auto supplier, said it is filing a separate motion asking the court to reject some unprofitable contracts with GM. Delphi also said it will freeze its hourly and salaried pension programs later this year and move employees into a defined-contribution plan.

"We are clearly focused on Delphi's future," Delphi Chairman and CEO Robert S. "Steve" Miller said in a statement. "Emergence from the Chapter 11 process in the U.S. requires that we make difficult, yet necessary, decisions.

Troy-based Delphi filed for bankruptcy in October and intends to emerge from court protection during the first half of 2007. Delphi said it wants to exit certain product lines and sell or close noncore plants by 2008.

Delphi's motion to void its labor contracts was widely expected; the company had delayed similar motions three times before. The company says it was saddled with uncompetitive labor agreements when it was spun off from GM in 1999 and wants to cut the wages of its 34,000 U.S. hourly workers as part of its restructuring.

Delphi, GM and its unions spent months negotiating but were unable to reach a wage agreement. Under its most recent proposal, which was rejected by the UAW and other unions, Delphi proposed dropping pay for current hourly workers to $22 per hour from $27 per hour through September 2007, then to $16.50 an hour, but that would include a one-time payment of $50,000.

"Delphi's misuse of the bankruptcy procedure to circumvent the collective bargaining process and slash jobs and wages and drastically reduce health care, retirement and other hard-won benefits or eliminate them altogether is a travesty and a concern for every American," the UAW said in a statement. It represents 24,000 Delphi workers.

The International Union of Electronics Workers - Communications Workers of America, which represents around 8,000 Delphi workers, also said it was disappointed in the filing.

"It further hinders a very difficult process in reaching an acceptable agreement," said Henry Reichard, chairman of a union board that represents plants in Ohio and other states. "We will not be threatened or intimidated into accepting an agreement that dismantles our plants and devastates our membership."

Delphi said it plans to keep negotiating with GM and its unions, and some analysts have said the added urgency could help the parties reach a deal.

Judge Robert Drain has scheduled a hearing on Delphi's request for May 9-10 and won't decide whether to void Delphi's contracts until after that hearing. If Drain allows Delphi to void its contracts and Delphi does so, the UAW and other unions have threatened to strike.

Delphi said it also plans to cut 25 percent of its salaried work force, or around 8,500 workers, including up to 40 percent of its corporate officers. Delphi said that measure should save $450 million per year.

The company has identified eight U.S. plants that are considered critical to its U.S. operations. They are located in Brookhaven, Miss; Clinton, Miss.; Grand Rapids, Mich.; Kokomo, Ind.; Lockport, N.Y.; Rochester, N.Y.; Warren, Ohio; and Vandalia, Ohio. Delphi said those plants will focus on product lines such as safety features, electronics, diesel and gas powertrains and climate control products.

Twenty-one other plants that do not make core products - including those that make brakes and chassis, instrument panels, door modules and steering components - will be sold or closed. Delphi said it will provide further details on those plants in its filing, but they include plants in Dayton, Ohio, Saginaw and Flint.

"We believe many of these product lines have the potential to compete successfully under new ownership that has the resources and capital to invest in them," Delphi President and Chief Operating Officer Rodney O'Neal said in a statement.

Delphi said it will ask the court to reject unprofitable contracts with GM accounting for around half of Delphi's annual volume with GM. Delphi said the judge is expected to consider the motion on May 12, which gives both companies time to continue negotiating prices.

"We simply cannot continue to sell products at a loss," Miller said.

In addition, Delphi sent a letter to GM Friday that will begin the process of resetting terms for more than 425 commercial agreements that have expired since Delphi filed for bankruptcy. Those terms will be negotiated outside of bankruptcy court.

Delphi also said it will freeze pension benefits for hourly workers on Oct. 1 and for salaried workers on Jan. 1 and will replace them with plans that require employee contributions with company matches. Workers will still have access to any accrued benefits.

The company may ask for relief from the Pension Benefit Guaranty Corp., the Internal Revenue Service and possibly Congress so that when it emerges from bankruptcy protection it won't immediately owe billions of dollars to its underfunded pension plan. The company expects it will take at least six years to fully fund its pension plan.

Despite unions' fury at Delphi's wage proposals, Delphi said it is encouraged by its progress in negotiations so far and hopes to reach an agreement outside of court. GM's cooperation in a settlement is key, since Delphi would depend on GM, its largest customer, to supplement its wage offer or provide benefits. For example, in Delphi's latest proposal, wages would fall to $12.50 an hour if they weren't supplemented by GM, the UAW said. GM has said a Delphi settlement could cost it between $5.5 billion and $12 billion.

Delphi, GM and the UAW did agree last week to a buyout offer for approximately 17,000 U.S. hourly workers. Under that agreement, workers will be eligible for a lump sum payment of $35,000 to retire. Also, up to 5,000 Delphi workers will be eligible to return to GM.

For starters, Wall Street no longer cares much about how fast gross domestic product expanded late last year. Its attention is squarely focused on the first quarter of 2006, when many believe the economy rebounded.

A recent survey of economic forecasters by the Federal Reserve Bank of Philadelphia shows the consensus view on Wall Street is that GDP grew 4.4 percent in the first quarter (which ends this week).

But many economists believe that the economy may actually have grown much faster, perhaps increasing by more than 5 or 6 percent.

What concerns investors is that in addition to revising upward its estimate for fourth-quarter GDP growth, the government also upped its measure of inflation, a natural byproduct of economic expansion.

According to the Bureau of Economic Analysis, core inflation-based on personal consumption expenditures minus volatile energy and food costs-rose 2.4 percent over the past year. That was revised higher from earlier estimates of 2.1 percent.

While this isn't a huge jump in prices, it does give the hawks some ammunition in their calls for the Federal Reserve Board to keep hiking interest rates in an effort to combat inflation.

The clock was the invention of Durst's father, Seymour Durst, who nursed a keen sense of fiscal responsibility and believed government profligacy to be a national curse.

The elder Durst, who died in 1995, originally thought of the idea in the early 1980s as the US budget deficit started to mount during the presidency of Ronald Reagan, but the technology was not immediately available to realise his vision.

The original 11 foot by 26 foot (3.3 meter by 8.9 meter) clock was eventually erected a block from Manhattan's Times Square in 1989 when the national debt stood at 2.7 trillion.

For the next decade it tracked, odometer style, the government's red ink with an extra feature which, by dividing the main figure by the number of families in the country, offered an estimate for how much each family owed as their share.

Toward the close of the millennium, with a booming economy fuelling annual budget surpluses, the clock began to slow and finally ran into its first mechanical problem.

"It wasn't designed to run backwards," Douglas Durst explained.

Believing that the signboard had served its purpose, the Dursts pulled the plug in 2000 with the debt total showing around 5.7 trillion dollars and the individual "family share" standing at close to 74,000 dollars.

The clock was covered with a red, white and blue curtain, but not dismantled.

"We'll have it ready in case things start turning around, which I'm sure they will," Durst said at the time.

He only had to wait two years as the Bush presidency coincided with an upsurge in borrowing. The curtain was raised in 2002 and the digital readout flickered back to life showing a national debt of 6.1 trillion dollars with the numerals whizzing round faster than ever.

In 2004, the old clock was torn down and replaced with a newer model which had optimistically been modified to run backwards should such a happy necessity arise.

Instead the debt continued to rise at such a rate that the once unthinkable total of 10 trillion dollars veered from alarmist fantasy into the realm of impending reality.

"When it became clear what was going to happen, our first thought was to free up the digital square occupied by the dollar sign so that we could cope with a 14th digit," Durst said.

The latest plan is for yet another replacement, involving a larger scale signboard.

"We're not happy at the impact we're making with this one," he said.

Durst insists that the clock is non-partisan in its effort to shame the federal government over what he sees as its willingness to gamble away the nation's future.

"We're a family business," Durst said. "We think generationally, and we don't want to see the next generation crippled by this burden," he said.

Last week, the "family share" readout on the clock stood some loose change short of 90,000 dollars.

In addition, the Pentagon and the Bush administration have been on another kind of binge, privatizing national (and international) security. From New Orleans to Iraq, rent-a-mercenary companies are having a for-profit field day based on the woes of others. According to P.W. Singer, author of Corporate Warriors, for every hundred U.S. soldiers in our first Gulf War, there was one private "security contractor." This time around, it's closer to one in ten. It has been estimated that there are up to 20,000 guns-for-hire, Iraqi and Western, working in that country, the second largest (if also motliest) force in the "coalition of the willing."

Such private companies are above the law in Iraq, and their trigger-happy hirees don't hesitate to create mayhem. In part because their own casualties can largely be kept private, such companies have done much to reduce the political costs of going to war in the United States, while raising the stakes in Baghdad. In a February 2004 New Yorker article, retired Air Force Colonel Sam Gardiner told journalist Jane Mayer, "When you can hire people to go to war there is none of the grumbling and political friction" associated with mustering a larger public fighting force.

Increasingly this sort of questionable "security" is making itself felt at home as well. The premises of the Homeland Security Department are now guarded by the private security firm, Wackenhut Services, Inc. (hired through a contract with the U.S. Navy). Among other goofs, its personnel reportedly mishandled a potential anthrax attack on Homeland Security headquarters. ("An envelope with suspicious powder was opened last fall at the headquarters. Daniels and other current and former guards said they were shocked when superiors carried it past the office of Secretary Michael Chertoff, took it outside and then shook it outside Chertoff's window without evacuating people nearby.") Meanwhile, Wackenhut guards at the Energy Department, according to its inspector general, "had thwarted simulated terrorist attacks at a nuclear lab only after they were tipped off to the test; and... had improperly handled the transport of nuclear and conventional weapons." This is what for-profit national security can mean on a small scale.

Now, transfer that thought to the ultimate weaponry -- our nuclear arsenal. Sounds like the sort of nightmare you'd only find in the Wackenhuttiest of dystopian sci-fi novels, but read on and imagine our nuclear future in those same trustworthy privatized hands. Tom

Privatizing the Apocalypse
By Frida Berrigan

Started as the super-secret "Project Y" in 1943, the Los Alamos National Laboratory in New Mexico has long been the keystone institution of the American nuclear-weapons producing complex. It was the birthplace of Fat Man and Little Boy, the two nuclear bombs the U.S. dropped on Hiroshima and Nagasaki in August 1945. Last year, the University of California, which has managed the lab for the Department of Energy since its inception, decided to put Los Alamos on the auction block. In December 2005, construction giant Bechtel won a $553 million yearly management contract to run the sprawling complex, which employs more than 13,000 people and has an estimated $2.2 billion annual budget.

"Privatization" has been in the news ever since George W. Bush became president. His administration has radically reduced the size of government, turning over to private companies critical governmental functions involving prisons, schools, water, welfare, Medicare, and utilities as well as war-fighting, and is always pushing for more of the same. Outside of Washington, the pitfalls of privatization are on permanent display in Iraq, where companies like Halliburton have reaped billions in contracts. Performing jobs once carried out by members of the military -- from base building and mail delivery to food service -- they have bilked the government while undermining the safety of American forces by providing substandard services and products. Halliburton has been joined by a cottage industry of military-support companies responsible for everything from transportation to interrogation. On the war front, private companies are ubiquitous, increasingly indispensable, and largely unregulated -- a lethal combination.

Now, the long arm of privatization is reaching deep into an almost unimaginable place at the heart of the national security apparatus --- the laboratory where scientists learned to harness the power of the atom more than 60 years ago and created weapons of apocalyptic proportions.

Profane Problem or Prolific Profit?

Nuclear weapons are many things to many people -- the sword of Damocles or the guarantor of American global supremacy, the royal path to the apocalypse or atoms for peace. But in each notion, they are treated as idols -- jealously-guarded, shrouded in code, surrounded by sacred secrecy. That is changing.

Private companies have long played a role in the nuclear complex, but it's been a peripheral one. For example, Kaiser-Hill, a remediation company, is cleaning up radioactive waste at Rocky Flats, the Denver, Colorado complex that manufactured nuclear weapons. At Idaho Falls, another company, CH2M, is mopping up the mess left behind after the construction of 52 nuclear reactors. BWX and Honeywell formed a new company along with Bechtel to manage and operate the Pantex Plant in Texas which assembled nuclear weapons throughout the Cold War. At least ten different subcontractors are involved in managing the Hanford nuclear complex. But the famed nuclear laboratories, Los Alamos, Lawrence Livermore, and Sandia -- where the high priests of nuclear physics are free to explore the outer realms of their craft -- have long been above prosaic bottom-line or board-room considerations. Until this year, that is.

At Los Alamos, the University of California has already been replaced by a "limited liability corporation," says Tyler Przybylek of the Department of Energy's Evaluation Board; and, more generally, the writing is on the containment wall. Nuclear laboratories are no longer to be intellectual institutions devoted to science but part of a corporate-business model where research, design, and ultimately the weapons themselves will become products to be marketed. The new dress code will be suits and ties, not lab coats and safety glasses. Under Bechtel, new management will lead to a "tightly structured organization" that will "drive efficiency," predicts John Browne, who directed the lab at Los Alamos from 1997-2003. "If there is a product the government wants," he concludes, "they will necessarily be focused on that. A lot more money will be at stake."

Los Alamos was the first to go. Now, the management contract for the Lawrence Livermore National Laboratory, is on the auction block as well.

Bechtel's Boondoggles

Many say strong corporate oversight will correct a legacy of embarrassing missteps at Los Alamos. The keystone of the nuclear complex, it has been dogged by missing classified computer disks, cost overruns on its expensive new projects, and an outspoken cadre of scientists who found their voice on LANL: The Real Story, a blog where once deferential employees blew off steam and exposed lapses in lab management.

The idea is that, under private management, this legacy of money wasted and dreams deferred can do an abrupt u-turn. But the question is: Can Bechtel (or any other private military contractor) usher in a new era of nuclear responsibility? Pete Domenici, Republican Senator and Chairman of the powerful Energy and Water Committee, thinks so. In January, he claimed that "this great lab will thrive under the management team led by Bechtel."

But a look at Bechtel's record might not inspire others to Domenici's confidence. The California-based construction giant has a long history of big projects, big promises, bigger budgets and even bigger failures.

In Boston, Bechtel was put in charge of the "Big Dig," the reconstruction of Interstate 93 beneath the city. In 1985, the price tag for the project was estimated at about $2.5 billion. Now, it is a whopping $14.6 billion (or $1.8 billion a mile), making it the most expensive stretch of highway in the world. Near San Diego, citizens are still paying the bills for cost over-runs at a nuclear power plant where Bechtel installed one of the reactors backwards.

In 2003, Bechtel took this winning track record to Baghdad, where it blew billions in a string of unfinished projects and unfathomable errors. The company reaped tens of millions of dollars in contracts to repair Iraq's schools, for example, but an independent report found that many of the schools Bechtel claimed to have completely refitted, "haven't been touched," and a number of schools remained "in shambles." One "repaired" school was found by inspectors be overflowing with "unflushed sewage."

Bechtel also has a $1.03 billion contract to oversee important aspects of Iraq's infrastructure reconstruction, including water and sewage. Despite many promises, startling numbers of Iraqi families continue to lack access to clean water, according to information gathered by independent journalist Dahr Jamail. The company made providing potable water to southern Iraq one of its top priorities, promising delivery within the first 60 days of the program. One year later, rising epidemics of water-borne illnesses like cholera, kidney stones and diarrhea pointed to the failure of Bechtel's mission.

Outside of its ill-fated reconstruction contracts in Iraq, Bechtel is not known as a large military contractor, but the company has been quietly moving into the nuclear arena. It helped build a missile-defense site in the South Pacific, runs the Nevada Test Site where the United States once performed hundreds of above-and underground nuclear tests. Bechtel is also the "environmental manager" at the Oak Ridge National Lab, which stores highly-enriched uranium, and is carrying out design work at the Yucca Mountain repository where the plan to store 77,000 tons of nuclear waste has environmentalists and community activists up in arms.

At Washington State's Hanford Waste Treatment Plant, Bechtel is working on technology to turn nuclear waste into glass. But the estimated costs of building the facility to do that have doubled in one year to about $10 billion while the completion date slipped from 2011 to 2017. Members of Congress have proposed that the Nuclear Regulatory Commission take over management of the project from Bechtel because of its cost overruns and delays.

Proliferation's New Meaning

Given this track record, it's hard to make the case that Bechtel assumes the helm at Los Alamos out of an altruistic, even patriotic, desire to impose clean, lean corporate management on a complacent institution long overfed at the public trough. The question remains: Why this urge to privatize the apocalypse?

To answer that question, you have to begin with the post-Cold War quest of the nuclear laboratories for a new identity and raison d'être. The dismantling of the Berlin Wall, the loss of the other superpower as a nuclear twin and target, and an international shift in favor of nuclear disarmament sent Los Alamos and the whole U.S. nuclear complex into existential crisis: Who are we? What is our role? What do we do now that nuclear weapons have no obvious role in a world of, at best, medium-sized military enemies? Throughout the Clinton years, these questions multiplied while the nuclear arsenal remained relatively stable. More recently, with a lot of fancy footwork, a few friends in Congress, and the ear of a White House eager to be known for something other than the Long War on global terrorism, the labs finally came up with a winning solution that has Bechtel and other military contractors seeing dollar signs.

They found their salvation in a few lines of the Nuclear Posture Review, released in January 2002, where the Bush administration asserted: "The need is clear for a revitalized nuclear weapons complex that will be able, if directed, to design, develop, manufacture, and certify new warheads in response to new national requirements; and maintain readiness to resume underground testing if required."

There's gold in that there sentence. During the Cold War, spending on nuclear weapons averaged $4.2 billion a year (in current dollars). Almost two decades after the "nuclear animosity" between the two great superpowers ended, the United States is spending one-and-a-half times the Cold War average on nuclear weapons. In 2001, the weapons-activities budget of the Department of Energy, which oversees the nuclear weapons complex through its "semi-autonomous" National Nuclear Security Administration (NNSA), totaled $5.19 billion; and a "revitalized nuclear weapons complex," ready to "design, develop, manufacture, and certify new warheads," means a more than billion-dollar jump in spending to $6.4 billion by fiscal year 2006.

And that's just the beginning. The NNSA's five-year "National Security Plan" calls for annual increases to reach $7.76 billion by 2009. David Hobson, Republican congressional representative from Ohio, calls this kind of budgeting "the ultimate white-collar welfare," saying that the weapons complex can be "viewed as a jobs program for PhDs."

He's right. That's a lot of money for a few labs and a few thousand scientists. And private military contractors large and small are all over it.

Entering Acronym Land

To justify this huge jump in spending, the nuclear laboratories have cooked up plans for an alphabet soup of projects as part of the SSMP, scientists are pushing -- to mention just a few of the acronyms on the table right now -- ASCC, MESA, the RRWP, the ICFHY campaign and the RNEP.

In the interest of not putting everyone to sleep, we can take a closer look at just a few of the Bush administration's proliferating nuclear projects. Under the umbrella of Stockpile Stewardship Management (SSMP), scientists are working to safeguard the stockpile of nuclear weapons and materials so it is not ravaged by time and neglect. The Reliable Replacement Warhead Program (RRWP) will exchange existing warheads for more "reliable" (read: more powerful) ones. There are plans underway to develop the Robust Nuclear Earth Penetrator (RNEP) and other "useable" new nuclear weapons supposedly to meet new threats by new enemies -- "rogue states" like Iran -- in future preemptive anti-proliferation wars. Under each of these programs are many other acronym-heavy, cash-rich programs that seem to lead nowhere -- except toward further nuclear proliferation.

The Inertial Confinement Fusion and High Yield Campaign is just one of the more outlandish and expensive of these projects. It proposes using lasers to replicate what happens inside an actual nuclear explosion in weapons labs. Sounds simple enough, right? The Nuclear Ignition Facility -- where the lasers will do their work -- is the single largest project in the NNSA budget and, according to analyst Christopher Paine, "quite possibly the most expensive experimental facility ever built." The Department of Energy projects $3.5 billion in costs for this alone, but the independent environmental group, the National Resources Defense Council, puts the figure higher yet -- at $5.32 billion -- and that money will be spent before anyone can even demonstrate that the system works.

The Age of Nuclear Terror?

Do nuclear weapons have a role in the "Age of Terror" -- other than as potential weapons for terrorist groups? In a new and ever-shifting environment of emerging regional powers and wars that transcend national boundaries, the Bush administration is taking a have-it-both-ways approach: It is pushing aggressive non-proliferation policies for chosen enemy nations and embracing a policy of accelerated nuclear proliferation for itself. How much harder will it be in the future to dissuade other powers from building nuclear weapons when the American nuclear industry and its weapons labs have switched even more fully into private mode and the profit-motive is increasingly at stake in global nuclear planning? These and many other questions unfortunately remain unasked. Yet, a new era of nuclear weapons for profit threatens to turn Armageddon into a paying operation.

During the height of the Cold War, when competition between the nuclear laboratories seemed to rival the superpower stand-off, a Lawrence Livermore scientist posted a sign that read: "Remember, the Soviets are the Competition, Los Alamos is the Enemy."

In a new era of potential corporate antagonism over apocalyptic weaponry, will there be a sign at the Bechtel-run nuclear lab emblazoned with: "Remember, the Terrorists are the Competition, Lockheed Martin is the Enemy"?

Frida Berrigan (berrigaf@newschool.edu) is a Senior Research Associate at the World Policy Institute's Arms Trade Resource Center. Her primary research areas with the project include nuclear-weapons policy, war profiteering and corporate crimes, weapons sales to areas of conflict, and military-training programs. She is the author of a number of Institute reports, most recently Weapons at War 2005: Promoting Freedom or Fueling Conflict.

Copyright 2006 Frida Berrigan

The National Environmental Trust warns that, though the new rule sets slightly higher standards for light trucks (i.e. minivans and similar vehicles) to meet by 2011 (an increase from 22.2 mpg to 24.1 mpg), it also would nullify rules already in place in 11 individual states imposing even stronger standards.

The National Resources Defense Council questioned how much the new standards would really decrease America's "addiction to oil," calling the new standards "anemic" and saying they amount to no more than "baby steps at a time when the country needs bold action."

The U.S. Public Interest Research Group (U.S. PIRG) had a similar reaction, saying the new rule "installs a mere speed bump on the dead end road of oil addiction," according to an article from the Environment News Service (ENS).

The ENS article reports on Transportation Secretary Norman Mineta's announcement Wednesday, offers reaction from the Alliance of Automakers (who don't seem too put off by the changes), and mentions the environmental and consumer concerns at the end.

Army officials told The Associated Press that the order was prompted by concerns that soldiers or their families were buying inadequate or untested commercial armor from private companies - including the popular Dragon Skin gear made by California-based Pinnacle Armor.

"We're very concerned that people are spending their hard-earned money on something that doesn't provide the level of protection that the Army requires people to wear. So they're, frankly, wasting their money on substandard stuff," said Col. Thomas Spoehr, director of materiel for the Army.

Murray Neal, chief executive officer of Pinnacle, said he hadn't seen the directive and wants to review it.

"We know of no reason the Army may have to justify this action," Neal said. "On the surface this looks to be another of many attempts by the Army to cover up the billions of dollars spent on ineffective body armor systems which they continue to try quick fixes on to no avail."

The move was a rare one by the Army. Spoehr said he doesn't recall any similar bans on personal armor or devices. The directives are most often issued when there are problems with aircraft or other large equipment.

Veterans groups immediately denounced the decision.

Nathaniel R. Helms, editor of the Soldiers for the Truth online magazine Defense Watch, said he has already received a number of e-mails from soldiers complaining about the policy.

"Outrageously we've seen that (soldiers) haven't been getting what they need in terms of equipment and body armor," said Sen. Christopher Dodd (news, bio, voting record), D-Conn., who wrote legislation to have troops reimbursed for equipment purchases. "That's totally unacceptable, and why this directive by the Pentagon needs to be scrutinized in much greater detail."

But another veterans group backed the move.

"I don't think the Army is wrong by doing this, because the Army has to ensure some level of quality," said Paul Rieckhoff, executive director of Iraq and Afghanistan Veterans of America. "They don't want soldiers relying on equipment that is weak or substandard."

But, Rieckhoff said, the military is partially to blame for the problem because it took too long to get soldiers the armor they needed. "This is the monster they made," he said.

Early in the Iraq war, soldiers and their families were spending hundreds or even thousands of dollars on protective gear that they said the military was not providing.

Then, last October, after months of pressure from families and members of Congress, the military began a reimbursement program for soldiers who purchased their own protective equipment.

In January, an unreleased Pentagon study found that side armor could have saved dozens of U.S. lives in Iraq, prompting the Army and Marine Corps to order thousands of ceramic body armor plates to be shipped to troops there this year.

The Army ban covers all commercial armor. It refers specifically to Pinnacle's armor, saying that while the company advertising implies that Dragon Skin "is superior in performance" to the Interceptor Body Armor the military issues to soldiers, "the Army has been unable to determine the veracity of these claims."

"In its current state of development, Dragon Skin's capabilities do not meet Army requirements," the Army order says, and it "has not been certified to protect against several small arms threats that the military is encountering in Iraq and Afghanistan."

The Marine Corps has not issued a similar directive, but Marines are "encouraged to wear Marine Corps-issued body armor since this armor has been tested to meet fleet standards," spokesman Bruce Scott said.

Military officials have acknowledged that some troops - often National Guard or Reservists - went to war with lesser-quality protective gear than other soldiers were issued.

"We'll be upfront and recognize that at the start of the conflict there were some soldiers that didn't have the levels of protection that we wanted," Spoehr said. Now, he added, "we can categorically say that whatever you're going to buy isn't as good as what you're going to get" from the military.

In interviews Thursday, Army officials said aggressive marketing by body armor manufacturers was fueling public concerns that troops are not getting the protection they need.

Army Lt. Col. Scott Campbell said the Army has asked Pinnacle to provide 30 sets of the full Dragon Skin armor so it can be independently tested. He said Pinnacle has indicated it won't be able to provide that armor until May, and the company said that is still the plan.

Campbell said initial military tests on small sections of the Dragon Skin armor had disappointing results. He said Pinnacle has received $840,000 in research funding to develop improved armor.

Spoehr said he believes the directive will have little impact on soldiers in Iraq or Afghanistan because it's likely that nearly all are wearing the military-issued body armor.

There have been repeated reports of soldiers or families of soldiers buying commercial equipment or trying to raise thousands of dollars to buy it for troops who are preparing to deploy overseas.

"This very favourable evolution stems of course from growth but also from the results of the measures taken by Prime Minister Dominique de Villepin in favour of employment and notably the CNE and the social cohesion plan," he told a press conference.

The CNE, or New Employment Contract, came into effect last year for small companies, and was a prototype for the CPE, or First Employment Contract, which has sparked the current social unrest.

Official data published earlier on Friday showed that the jobless rate had fallen by 0.4 percent in February, after a rise of 0.7 percent in January, but that it still stood at 9.6 percent.

The latest figures are likely to be interpreted as offering the centre-right government some encouragement in pursuing its employment policies despite widespread public hostility.

The plan by the prime minister to get more young people into jobs has turned into one of the worst crises in Chirac's 11-year presidency - sparking a protest movement that on Tuesday brought more than a million people onto the streets.

Chirac was to make a long-awaited address to the nation on the disputed youth jobs contract later on Friday, amid predictions that he would stand by his prime minister and sign the measure into law.

The CPE, an open-ended contract that can be terminated without explanation during a two-year trial period, is designed to bring down France's high youth unemployment rate by making it less risky for employers to take on young staff.

But opponents say it is a step back from France's hard-won system of social protection and a move toward what they see as the cut-throat labour policies that prevail in Britain and the United States.

Breton said Friday that the weeks of demonstrations and strikes sparked by the CPE had not had any effect on the economy so far.

He told the press conference that the French economy was on course for lasting growth of 2-2.5 percent per year from 2006.

"Our economy has solidly entered a growth regime," he said.

Earlier Friday, official data estimated that the French economy grew by 1.4 percent in 2005, confirming an earlier estimate but raising growth in the last quarter to 0.4 percent from 0.2 percent.

Breton also announced that France had finally cut overspending to within EU limits last year, after years of excessive deficits.

"After several years, France has returned within the limits of the Treaty of Maastricht as it had undertaken to do," he said.

The public deficit was at 2.87 percent of output in 2006 and was set for 2.8 percent this year, within the EU ceiling of three percent, said Breton.

The INSEE national statistics institute had reported earlier on Friday however that that the public debt had risen to 66.8 percent of output from 64.4 percent in 2004.

The European Commission reacted to the data by saying it was a "worrying" development.

A sensitive issue in public finances in France is the size of the civil service and the question of reducing it as the post-war generation retires.

On Friday Breton said the large staff at his ministry would continue to be reduced this year. About 2,600 posts are set to be cut there in 2006.

Chirac's rare address to the nation was due to be carried live on all the main French television channels at 8pm. The last time he made a similar speech was during the riots in France's high-immigration suburbs last November.

European Central Bank president Jean-Claude Trichet, in Paris to attend a seminar, said on Friday that European labour policies lacked flexibility and that structural reforms were needed to encourage growth.

"I mentioned as a key issue in Europe, the necessary elevation of the growth potential which supposes that there is very active implementation of structural reforms," he said.

The potential of an economy is a measure of its efficiency and capacity to grow without generating inflation because of bottlenecks.