Jacques Bino, a union activist in his 50s, was shot dead shortly after midnight on Wednesday near a roadblock in the city of Pointe a Pitre, where armed youths had opened fire on police. His was the first death in a conflict that escalated from peaceful protest to violent confrontation.

The revolt, led by the umbrella group Collective against Extreme Exploitation, began on January 20 as a general strike and protest against the island's high living costs.

But since negotiations with the French Government over state aid broke down, frustration increased and the island, an idyllic holiday destination known for its beaches and luxury hotels, resembled a war zone.

"They wanted Beirut; they've got Beirut," one protester told Liberation newspaper. Burning roadblocks reportedly manned by armed bands were erected around Pointe a Pitre, Guadeloupe's biggest city, where 70 per cent of people live in social housing. Shops were looted, cars set on fire and tourists told to stay inside their hotels.

Several policemen, using teargas to disperse the crowds, were injured and dozens of demonstrators were arrested.

Mr Sarkozy, fearful that the unrest in France's overseas territories could spread to the mainland, unveiled a package of state aid at a meeting with union leaders worth between €1.6 billion ($3.2 billion) and €2.6 billion, including tax cuts and one-off payments for the unemployed.

Mr Sarkozy, whose approval ratings are at their lowest since his election in 2007, is terrified of a repeat of the discontent that brought France to a standstill in the past.

Weeks after 2.5 million people took to the streets to protest at his handling of the economy, another day of strikes was scheduled for next month.

But as the Guadeloupe crisis heats up and shows signs of spreading to Martinique and French Guiana, a mishandled approach could spell disaster for Mr Sarkozy.

Guardian News & Media