Hollande taps old hands, new faces for French government

PARIS (Reuters) - French President Francois Hollande named a government dominated by moderate left-wingers on Wednesday after Socialist Party boss Martine Aubry, overlooked for the post of prime minister, said she no longer wanted to be part of the new cabinet.

Hollande, sworn in on Tuesday as France's first Socialist president in 17 years, named Pierre Moscovici as finance minister and Laurent Fabius as foreign minister, key posts under Prime Minister Jean-Marc Ayrault, like them a social democrat.

Ayrault said the team of 17 men and 17 women, the vast majority of whom have not been ministers before, was the first in French history to respect total gender balance, and their first meeting on Thursday would deliver on a promise to cut their own salaries by 30 percent.

"We're already well-oiled and up and running," Ayrault told France 2 public television.

Moscovici takes charge of a stagnant economy lumbered with a jobless rate of almost 10 percent and the challenge of cutting heavy debts as Hollande launches his campaign against excessive austerity in Europe, a region that has been struggling with a financial market crisis for more than two years.

The new lineup, which could change again after parliamentary elections finish on June 17, holds its first meeting on Thursday - a public holiday in France - before Hollande heads to summits in the United States of the G8 group of wealthy countries, and NATO.

The withdrawal of Aubry, beaten by Hollande last year in the contest to run for president on the Socialist ticket, removes from the team an experienced former minister with a reputation as a fist-thumping left-winger.

Aubry, daughter of former European Commission chief Jacques Delors and architect of the 35-hour week as labor minister in the last French left-wing government of 1997-2002, told Le Monde newspaper she would stay away rather than settle for a consolation post.

"I talked with Francois Hollande. He said he had settled for Jean-Marc Ayrault. We agreed that under this configuration my presence in the government made little sense."

Ayrault played down the affair, saying relations with Aubry remained friendly and that she was committed to playing a key role in the looming parliamentary election campaign.

Ayrault, in line with Hollande's promise to be a "Mr Normal" president after the more flashy leadership style of Nicolas Sarkozy, said his job was not to talk too much and "not to show off, but be useful to my country".

OLD AND NEW

Ayrault, a veteran social democrat who, like Hollande, has never been a minister, will head a team comprising a number of veterans and a lot of new blood. Only a handful of the 34 ministers have previously held national government posts.

Manuel Valls, 49 and the closest his party has to a right-winger, was named interior minister.

Najat Vallaud Belkacem, a 34-year-old who was a spokeswoman in Hollande's campaign team, was named minister for women's rights and government spokeswoman.

Moscovici, a graduate of the elite ENA civil service school who was Hollande's presidential campaign chief, initially had been expected to get a post other than finance. The 54-year-old, who speaks good English, served as a junior European affairs minister in a Socialist-led coalition a decade ago.

He wound up taking a job that was long expected to go to Michel Sapin, one of Hollande's closest friends and a man who believes blanket austerity risks plunging the euro zone into deep recession.

Sapin became labor minister while Arnaud Montebourg, an outspoken lawyer and member of parliament who has made a name for himself as a vociferous critic of globalization, was put in charge of industrial revival.

Fabius, the new face of foreign policy, was prime minister at just 37 in 1984 under Francois Mitterrand and was finance minister in 2000-2002 under Lionel Jospin's premiership.

He has been more of an enemy than a friend of Hollande in the past. Fabius, 65, treated Hollande with disdain when the two clashed over Europe in 2005, and campaigned for a "No" vote in a referendum on a European Constitutional treaty that Hollande, then Socialist Party leader, supported.

DELICATE BALANCE

The changeover from a conservative administration does not appear to have rattled markets for now, despite Hollande's vow to plead against excessive austerity in debt-stricken Europe.

Demand was solid on Wednesday at the first bond auction since Hollande took office, the yield on the benchmark five-year bond hitting a record low of 1.72 percent as political turmoil in Greece drove investors towards the safe haven of French debt.

Ayrault stressed that his government was committed to sound financial management and that new measures to be adopted this week and next, including a rise in back-to-school grants to families, would be financed by savings elsewhere.

Hollande had been expected to find a heavyweight job for Aubry because of both her experience and the need to hold together a historically fractious party.

Right-wingers from Sarkozy's UMP party seized on Aubry's exclusion to say the Socialist show of unity was a charade that voters should not fall for in the parliamentary elections, which take place in two rounds on June 10 and 17.

Voting intention polls show that France's 46 million voters should give the left control of parliament, following Hollande's presidential victory.

(Additional reporting by Leigh Thomas and Nicholas Vinocur; writing by Brian Love; editing by Geert De Clercq and Tim Pearce)

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