A plan by French finance minister Nicolas Sarkozy to persuade supermarket retailers to reduce prices by 3% is reported to have collapsed.

Talks between Sarkozy and industry bosses are reported to have broken down, ruining any chance of a negotiated deal between the various parties. Instead, the minister has instructed advisers to review options for legislation to lower the price of branded goods in order to drive consumer spending power, reported Dow Jones International News, citing sources close to the situation.

Sarkozy had hoped that retailers and producers of branded goods would agree to lower prices in return for certain concessions, including more flexibility in store expansion.

However, Sarkozy's team have reportedly failed to convince retailers such as Carrefour and Casino, and branded goods companies such as Danone, to lower their prices and therefore accept lower margins.

At a meeting earlier this week at the finance ministry, attended by representatives of several major consumer goods companies, a link was made between prices and jobs, Dow Jones reported, citing people involved in the talks.

"The message was relayed that if lower prices meant lower margins they could also mean some consideration of where exactly companies, particularly multinationals, locate their industrial investments," one person said.

"The ministry people didn't seem to make the connection on how companies, particularly listed companies, operate," another talks insider was quoted as saying. "If prices come down, costs must come down...and manpower costs too. I'm not sure that job cuts was what the ministry had in mind when they dreamed this up."