Paris signed a new deal with the firm running its bike rental scheme Monday after thieves and vandals forced the city to replace the entire 20,000-strong fleet within just two years.

Thousands of gleaming grey bicycles were rolled out in July 2007 to encourage Parisians and the millions of tourists who visit each year to pedal their way along the Seine, past the Louvre and around the Eiffel Tower.

Paris Mayor Bertrand Delanoe has touted the "Velib" cheaper bike rental as a way to cut down on car use, reduce pollution and offer an alternative to crowded metro trains in the French capital.

But advertising giant JCDecaux, which runs the hugely successful city-wide scheme, was forced to replace 16,000 bicycles after they were returned to rental stations with twisted handlebars, torn baskets and crushed wheels.

Some were covered in rust after being fished out of the Seine.

Another 8,000 have disappeared, with some of the easily recognizable grey bicycles spotted on the streets of eastern European cities.

The Paris city council agreed at a meeting to compensate JCDecaux and the firm will carry out studies to address the vandalism problem.

"It's quite simple. The entire fleet of 20,000 Velib bikes has been replaced at least once," Albert Asseraf, a director general at JCDecaux, told AFP.

Asseraf said the bicycles are often damaged when first-time users fail to properly lock them in the stands, creating an opportunity for theft or other malice.

Despite four public campaigns by the city and improvements to the bike stands, the vandalism has continued, resulting in losses of 8.5 million euros (12.7 million dollars) for JCDecaux.

"Why are people vandalising our bikes? I think that's something that can only be measured through studies," he said.

"It's part of the broader issue of vandalism, targeting cars, painting graffiti on walls, damaging public buildings."

Under the terms of the deal approved Monday, the city will pay up to 25 percent of the replacement cost of the bicycles, up from between four and 20 percent previously.

Also the city gave JCDecaux a larger stake in plans to expand the service, with the company to get 50 percent of all revenues beyond 17.5 million euros.

In March, the scheme was extended to nearby suburbs and the list of rental stands keeps growing.

The fate of the Velib bicycles has been a topic of debate for the past months with some officials saying the experience raises questions about how Parisians treat public property.

"There is absolutely no respect for these bicycles," lamented Guillaume Pepy, president of the SNCF rail operator. "They are collectively owned and so they are the target of public resentment."

JCDecaux entered into a partnership with Paris city hall to launch Velib - a contraction of the French words "Velo" (bike) and "Liberte" (Freedom) - at a time when such bike schemes were gaining popularity in big cities worldwide.

The advertising company agreed to cover the full cost of the venture in exchange for exclusive rights to 1,600 publicity boards across the city.

A string of European cities such as Barcelona, Geneva and Stockholm offer bicycle rentals but the Paris scheme is by far the most extensive.

Dozens of foreign delegations have come to Paris over the past two years to take stock of its "Velib" experience.

JCDecaux has exported the scheme to Brisbane in Australia and is about to launch a similar plan in Toyama, Japan, in March.

Paris bikers can subscribe to the service online, paying a base fee of 29 euros a year while occasional cyclists can use a credit card to pay a one-off daily fee of one euro or weekly charge of five euros.

Rental is free for the first half hour, rising to one euro for the second, two for the next and so on - a progressive fee system that is designed to encourage short rentals and quick turn-over.