It's all part of a battle over taxes and benefits that have spurred political violence around the country, with workers striking to protest a rise in the retirement age.
The fiscal impact of slowly dropping "Jeune Entreprise Innovante (JEI)" is largely symbolic -- just 57 million Euros per year.
TechCrunch is laughing out its pixels over the fact that, as it removes innovation credits with one hand, the Sarkozy government is now willing to pay 75 million Euros per year to compensate copyright holders for kids' downloading of music.
But the real target here seems clear -- biotech.
It takes much more money, and much more time, to launch a biotech start-up than one dealing with software. There is also a lot of capital available for biotech in France, mostly from existing, scaled enterprises.
The open-source start-ups -- like Nuveo and Wallix -- have now launched in the U.S., and probably don't need the benefits of the JEI tax break any more. Significant action in biotech may still be years away, and any company hurt by the present decision with worthy work being done can simply sell out, the government feels.
Then there is the form of the tax break. It's an exemption from payroll taxes, the equivalent of Social Security contributions, that small open source companies may not have been paying anyway but which larger biotech start-ups (which get bigger capital rounds) can be expected to pay.
So the Sarkozy government, in order to quell protests in the streets, is throwing workers a bone in the form of a requirement that biotech firms gradually start paying for their workers' retirement again.
It's a symbolic act, but then French people like symbols. Whether it's a big enough symbol to quell the current unrest is debatable. And the unrest is far more relevant to the environment for start-ups in France than the tax break.