French unions rage at Hollande over Mittal deal

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French trade unions accused President Francois Hollande of betrayal on Saturday after his government backed away from a threat to nationalise ArcelorMittal's Florange steelworks.

The Socialist government said on Friday it had won promises from ArcelorMittal to avoid forced redundancies and inject 180 million euros to develop the Florange plant, meaning it would no longer have to take over the site.

Hollande came to office promising to create jobs and keep open the two furnaces at the site in northern France which ArcelorMittal says are not viable in a European steel sector suffering over-capacity.

ArcelorMittal confirmed the details of the deal on Saturday, saying it would negotiate a voluntary redundancy deal with unions.

Workers are angry the furnaces will remain idle rather than reopened and expressed doubt over ArcelorMittal's promise to offer alternative posts or early retirement packages for the 630 workers affected.

"We're on a war footing," Edouard Martin, head of union CFDT's Florange chapter, told the commercial Tele network.

"We've seen Mr. (Lakshmi) Mittal's pledges in the past and what has become of them - nothing - so we're not going to let anything pass without a fight."

Martin said the union had been a "nightmare" for former president Nicolas Sarkozy in the past over his jobs record, which analysts say was a factor in his election defeat in May, and could soon become one for Hollande.

ArcelorMittal rejects accusations it has broken promises in a country where it employs 20,000 over several sites.

The group incurred union wrath in 2009 when it shuttered the nearby Gandrange steelworks and laid off about 500 workers. Sarkozy had pledged to keep that site open.

Minister under fire

Threats this week by Industry Minister Arnaud Montebourg of a state takeover of Florange were denounced as "scandalous" by France's main employers group Medef, which fears it will jeopardise foreign investment in France.

While both left- and right-wing parliamentarians had backed Montebourg's proposal, commentators criticised his handling of talks with ArcelorMittal and said he should consider resigning.

"The Minister of Industrial Renewal can ask himself about the meaning of his ministry's title and the reasons justifying his role in government," centre-left daily Le Monde wrote in an editorial.

Montebourg, the most left-wing member of Hollande's government, fended off the criticism in a prime-time TV interview and said the president had approved using the threat of a takeover to pressure ArcelorMittal into a deal.

Asked whether he would resign, Montebourg told TF1 television: "If this had been a personal struggle, I would have thought about it very seriously, but this is a struggle for France ... I have decided to stay in my post."

Prime Minister Jean-Marc Ayrault expressed support for Montebourg's "efforts" and defended the Florange deal.

"The prime minister will keep a close watch to ensure that promises made yesterday by the group are kept ... the government will use all legal means at its disposal in the event they are not respected," he said in a statement.

'Expecting the worst'

Unions say revamping Florange will require about 400 million euros in funding from the European Union on top of ArcelorMittal's pledge - cash which has yet to be committed.

Montebourg said he was confident that ArcelorMittal would maintain industrial activity at Florange as promised, warning that nationalisation of the site remained an option if the group broke its commitments.

"Mr. Mittal has kept none," he said. "That's the reason why the president of the Republic ... told me that nationalisation remained on the table as a dissuasive weapon."

Hollande has tried to cultivate a worker-friendly image but his popularity has suffered as an economic slowdown pushes unemployment above 10 percent. A survey by pollster IFOP showed 41 percent of the French back him, one of the lowest scores for a president only six months into his term.

"We complained about Nicolas Sarkozy, but Francois Hollande is not doing any better," CGT unionist Frederic Maris told BFM television. "For the future, we're expecting the worst."

French officials argue that Mittal promised to keep blast furnaces running beyond 2010 when his company merged with Arcelor in 2006.

ArcelorMittal denies breaching commitments. Sources close to the group say Arcelor planned in 2003 - before its 2006 takeover by Mittal - to wind down inland blast furnaces in Europe, including the two in Florange, by 2010. (Additional reporting by Robert-Jan Bartunek in Brussels; Editing by Mark John and Janet Lawrence)