UPDATE 6-ArcelorMittal pulls French bid for EU steel project

* ArcelorMittal withdraws French site bid for EU-funded

project

* Move throws into question a deal to preserve Florange site

* Hollande says all promises for site will be kept

PARIS, Dec 6 (Reuters) - A politically charged deal between

the French government and ArcelorMittal to preserve jobs at an

ailing steelworks looked at risk of unravelling on Thursday

after the global steel giant ditched a bid to run an EU-funded

project there.

ArcelorMittal, 40-percent owned by India's Mittal

family, withdrew an application to use the Florange site in

northern France for an EU "green steel" pilot project that Paris

had hoped could keep two idled blast furnaces going.

ArcelorMittal and Prime Minister Jean-Marc Ayrault said the

move did not mean the idea of using Florange for the ULCOS

project to make steel with fewer greenhouse gas emissions was

being permanently abandoned.

Separately, President Francois Hollande said all promises

made to save the Florange site would be kept.

"I've seen the distress and anger and I know what's caused

it. But my responsibility is to make sure Florange has a

future," he told journalists in Paris.

A source close to the president said Lakshmi Mittal had made

a promise to run an ULCOS project at the site, and that only a

first version of the plan had been ditched.

Unions and local politicians reacted angrily to the news,

with metalworkers briefly occupying the furnaces, and other

employees staging sympathy action at two other ArcelorMittal

sites.

"We urge Francois Hollande: retake control of this issue,"

CFDT trade union leader Edouard Martin told i>Tele

television, warning the president to "stop these lies, this

cheating".

ArcelorMittal, which has been under fire for months in

France over its plan to permanently shut the Florange furnaces

on the grounds they are not economically viable, said it could

not currently pursue the ULCOS project for technical reasons.

"(This) is perfectly coherent with what is in the agreement

signed with the French government," the company said, adding:

"This in no way means the ULCOS project is being abandoned."

Firebrand leftist Minister for Industrial Revival Arnaud

Montebourg raised the stakes last week by declaring Indian steel

magnate Lakshmi Mittal unwelcome in France and accusing him of

lying. He also threatened to nationalise the steelworks, raising

workers' hopes that were dashed by last Friday's deal.

Ayrault, whose government was appointed by Hollande after

the Socialist was elected president in May, said in a statement

that the European Commission had indicated that the project

could be pursued in a future tender.

Asked about the deal, Ayrault told the Senate that the

government had achieved its goals. "There will be no lay-offs:

that was the objective we had set for ourself."

But in the most optimistic case, a potential start date

would now be delayed by several years, throwing into question

the idea that ArcelorMittal would keep spending money to keep

the mothballed furnaces in working order.

A survey by pollster OpinionWay underscored a loss of faith

in the government, with 76 percent of respondents saying they

did not believe it could keep ArcelorMittal to its promises.

"LIARS"

Metalworkers at ArcelorMittal's Fos-sur-Mer plant in

southern France blocked the site's entrances to show solidarity

with their peers at Florange. Workers in the plant's finished

products section went on strike.

Union leaders at the company's Basse Indre plant in eastern

France called for a 24-hour strike next Monday. Florange workers

left the furnaces after being told a gas main that keeps it from

falling into disuse would be kept on.

"We're angry to see Florange workers and their union

representatives treated this way," said Michel Tosi, a CFDT

leader at Fos. "They were fooled."

Michel Liegbott, a Socialist lawmaker for the surrounding

Moselle region, told BFM television that the government had

broken its commitments with regard to Florange.

"We've been conned. They are liars," he said. "They should

have said what they are saying today six months or a year ago."

Last week's agreement, under which ArcelorMittal committed

to preserve some 630 jobs at the two blast furnaces, was a

crucial test of Hollande's pledge to stem a run of industrial

lay-offs and revive French competitiveness.

France's unemployment rate hit a new 13-year high of 10.3

percent in the third quarter of the year, data showed on

Thursday, piling more pressure on Hollande, who has vowed to

halt the rise by the end of 2013.

ArcelorMittal had agreed to invest 180 million euros ($235

million) in Florange and keep the furnaces in working order so

they could be used if its application to use the site for the

ULCOS project was successful.

ULCOS (Ultra-Low Carbon Dioxide Steelmaking) is a consortium

of 48 European companies and other organisations working to

develop ways to cut CO2 emissions from steel production in order

to curb the greenhouse gases blamed for global warming.

A European Commission spokesman confirmed on Thursday it had

received written notification from ArcelorMittal that it had

decided to withdraw its bid "due to technical difficulties".

Most Popular in Business