In late October, German Chancellor Angela Merkel travelled to Paris to meet with digital entrepreneurs.

French President Francois Hollande attended the meeting. So did European Commission President Jean-Claude Juncker. All three delivered speeches extolling the virtues of technology's economic opportunities - Europe would find a way to profit, they said, from the digital age.

No company has illustrated the hazards to that goal more than Uber, a California-based car-sharing service that has faced regulatory red tape, lawsuits, union outrage and general hand-wringing over the challenge it poses to traditional European economic structures.

It's a paradox: Europe wants the digital revolution, but is ill at ease with the ramifications of letting it happen.

France's Uber headache has illustrated the Gordian knot like no other. The country has a constrictive taxi market, extensive labour protections, some of the most powerful unions in Europe, persistent unemployment problems and a wolfish demand for Uber.

It makes for a combustible mix. Taxi drivers across France, protesting what they said was an illegal taxi service, held multiple demonstrations during the summer - blocking traffic, setting fires to tyres in the streets and, in some cases, getting into skirmishes.

Taxi licences cost between 130,000 and 250,000 euros (141,138 and 271,418 dollars) in Paris and slightly less in other areas in France, largely due to operators' lobby pressure to keep supply low.

That makes the drivers, many who paid out of their own pocket, ill-disposed to UberPop, the peer-to-peer app connecting unlicensed drivers to people looking for rides. When they vented their rage in June, it got ugly.

"They've ambushed our car and are holding our driver hostage. They're beating the cars with metal bats. This is France?? I'm safer in Baghdad," tweeted US singer Courtney Love from amidst the mayhem in June.

The French legal system followed suit. Two executives of UberPop were detained by French police in late June and are facing criminal charges - they will appear in court in February. Shortly after some of the fiercest protests, parent company Uber suspended the service.

"It was just incredible, what some of our drivers were subjected to," Uber spokesman Thomas Meister said in an interview. "People really struggle to understand, and [they] talk about Uber-ization of the labour market, or destruction of the market."

In this, France is not alone. The service has faced problems across Europe. Ilaria Maselli, who researches Uber and other start-ups for the Centre for European Policy Studies, said bans and lawsuits have effectively made UberPop non-existent. Two cases are pending on the European level.

"The problem was that there was a clear threat to the interests of incumbent companies," Maselli said. "The attitude we've seen in Europe has been strict, and reflects a kind of closed-mindedness because its objective is to protect existing industries."

Uber still has 1.5 million users across France and 10,000 active drivers in Paris - the market is Uber's second-largest in Europe after London. But the app has been pared down to its more traditional service, operating largely under French VTC system that allows professional drivers without a taxi licence to pick up pre-ordered rides.

For politicians like Merkel and Hollande, the question is whether new systems can fit in with existing laws on labour rights built on forms of work upended by the Uber model. In France especially, with youth unemployment rates of up to 25 per cent, the question hits a sore spot.

Meister, the Uber spokesman, said that a quarter of the company's drivers in France were unemployed before they started.

"We have a strong effect on getting people back to work. Maybe they come from a social background that makes it difficult to find a job - we're offering opportunities to people who didn't have them before."

Even if the jobs are created by Uber acting as an intermediary (it takes a percentage of each fare), the company doesn't consider its drivers employees. In many ways, its loose, laissez-faire attitude to enabling people to make an extra back runs headlong into a French social labour mentality that produced the 35-hour work week.

The transformation of workers into gig-based service providers - at least in the case of UberPop - has spawned a broad debate across Europe and in the US about the ramifications of the new economy for labour. Scholar Ursula Huws is just one academic raising the alarm on what she called, "ever-expanding proportions of transactions mediated by increasingly powerful global corporations."

But the model has found a potential champion in Emmanuel Macron, France's ambitious young economy minister who has campaigned for a loosening of the country's strict laws regulating business.

Many think he's on the winning side.

"These platforms grow fast, and legislation always lags behind," said Maselli. "But there's no point in going against innovation. You've got to work with it, and make it beneficial for everyone."

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