After 'racist' row, Lakshmi Mittal inks deal with France

Industry Minister Arnaud Montebourg, who shocked foreign investors this week by saying Arcelor's Indian chief executive, Lakshmi Mittal, was no longer welcome in France, had said the government had identified an industrialist ready to inject 400 million euros into the site.

Earlier on Friday, Montebourg huddled in a cafe with a group of orange-vested metal workers protesting near the Finance Ministry, telling them nationalisation was still an option.

Yet Hollande, who is battling to appease both left-wing voters angry at unemployment and foreign investors impatient to see structural reforms, is wary of the stigma even a temporary nationalisation would carry abroad.

Officials had defended the idea of a temporary nationalisation, saying it was a special case because ArcelorMittal had broken promises to keep the furnaces running.

But 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.

The group says overcapacity in Europe's steel market, with demand 28 percent below peak 2007 levels, has made Florange's furnaces uneconomical and that a buyer would have to absorb deep losses to take them on, even with the rest of the site.