By Jean-Baptiste Vey and Brian Love
PARIS (Reuters) - Emmanuel Macron's government, hoping to end a protracted French train strike, offered on Friday to soak up most of the national SNCF rail company's debt as long as modernization plans to make the railways more cost-effective are implemented, unions said.
The offer to absorb the bulk of SNCF debt -- 35 billion of a total 47 billion euros ($55 billion)-- goes some way to meeting the demands of more moderate unions involved in a strike that has halved train service for much of the past two months.
The offer was announced by the unions after meeting Prime Minister Edouard Philippe, who hopes moderate unions involved, primarily the CFDT and Unsa unions, will now pull out of the industrial action.
The Unsa union said the debt relief offer showed it was worth negotiating with the government but the hardline CGT union's chief rail representative, Laurent Brun, said "the conflict goes on".
The showdown is seen as a test of Macron's determination to push ahead with a wider agenda of economic reform in addition to an SNCF shake-up that would be the biggest since nationalization of the railways in 1937.
The reform his government has proposed seeks to reduce costs and end hiring of rail staff - they currently number 150,000 - on more protective contracts than exist in other sectors.
Opinion polls show a majority of voters back the government's railway reform plan and oppose the strike.
The SNCF debt is bigger than France's annual defense budget. The debt relief offer would happen in two stages, with 25 billion euros wiped off SNCF books in 2020, and the other 10 billion in 2022, according to union leaders.
The government has said that taking on some of the SNCF debt would increase public sector debt but would not threaten the government's commitment to keep the budget deficit under the EU's 3 percent of GDP limit.
Prime Minister Philippe was due to make a statement on the issue later on Friday morning.