Google resolved a compensation fight with French news publishers on Friday that sees the US Internet search giant setting up a 60 million euro fund to help France's media adapt to the digital age.

"There's been a global event … the conclusion of a deal between Google and a news media grouping that was able to unite to negotiate," France's President Francois Hollande said as French press representatives signed the deal with Google chairman Eric Schmidt at the presidential palace.

"France is proud to have reached this agreement with Google, the first of its kind in the world," he added.

The deal follows two months of mediation with French news publishers unhappy their websites were getting none of the advertising revenue Google earned from sending search clients to their news content.

"The decisions were made directly with Google's board and validated by Google chief executive Larry Page and Eric Schmidt," French government negotiator Marc Schwartz told Le Figaro website.

French press bosses and Google executives had been meeting several times a week since December in an effort to avoid a deadlock.

Google will set up a 60 million euro ($82 mn) fund to help French media develop online projects, the French president's office said. 

The president's office said the fund "will help the news press transition to the digital world."

Schmidt said on his Google blog: "A healthy news industry is important for Google and our partners, and it is essential to a free society."

A Google executive told AFP the deal was intended to help French news media increase online revenue and that the fund would finance "promising initiatives".

The news websites had wanted Google to share revenue earned from linking to their content, but the California-based search engine had said such a practice would "threaten (Google's) very existence".

While French news websites won't tap into Google's advertising revenue stream, the second part of the agreement will see the US company help them generate their own.

Schmidt said "Google will deepen our partnership with French publishers to help increase their online revenues using our advertising technology."

A similar deal had been reached in Belgium after a six year battle between Google and Belgian editors.

Editors in several other European countries, including Germany and Italy, have also complained much needed revenue is being unfairly syphoned off by Google.

In Germany the government has drafted a law forcing Google to pay commissions for linking to news content, but it has yet to pass parliament.

If no settlement had been reached the French government had threatened to introduce legislation, while Google warned it could retaliate by no longer indexing content from French news websites.

In Brazil three top news websites pulled their content from Google's news search engine in 2011 and said traffic to their websites was largely unaffected.