French unions are furious at Peugeot's announcement, calling it a "declaration of war" and an "earthquake."Speaking on French radio, union member Jean-Pierre Mercier accused Peugeot of looking out only for its financial interests. Explaining that workers like himself have been bracing for the cuts for months, he accused the car manufacturer of lying by failing to announce layoffs sooner.

The downsizing is also a blow to the newly elected Socialist government, which has promised pro-growth measures for France's ailing economy. But the carmaking giant is a major employer here, and fears of a ripple effect have spread.

In an interview on France's Europe 1 radio, Social Affairs Minister Marisol Touraine called the job cuts unacceptable and noted Peugeot had received several billion dollars of government aid. The government is studying ways to support affected workers.

The carmaker says it will close its Aulnay assembly plant near Paris, which employs more than 3,000 people. It will also cut about a quarter of its workforce at a second factory, in the northwestern city of Rennes.

Peugeot says it will try to find other jobs for about half of its affected employees.

Chief Executive Philippe Varin says the crisis affecting its European car business leaves the company with limited options, and that he understands the concerns of Peugeot workers, promising that nobody would be left by the wayside.

Peugeot reported a loss for the first half of the year, with sales of its small cars hardest hit. It says it needs to become leaner and more efficient to adjust to a shrinking European market.

The job cuts are the latest bout of grim economic news for Europe. A report out this week by the Organization for Economic Cooperation and Development finds unemployment rising across the 17-nation eurozone. In France, it topped 10 percent in May - up from just 7.5 percent in 2008.

In neighboring Spain, where the eurozone crisis has struck hard, Prime Minister Mariano Rajoy has announced more austerity measures, despite growing popular protests. In France, the auditing agency says the government must find about $12.5 billion in additional revenue or make more budget cuts to meet its deficit target this year.