UPDATE 5-Sarkozy claims steel plant goal, hits protest
* ArcelorMittal to invest 17 mln euros in plant
* Sarkozy says furnace to restart in second half of 2012
* ArcelorMittal says restart dependent on health of economy (Adds Sarkozy quote on protest)
PARIS, March 1 (Reuters) - President Nicolas Sarkozy claimed a political goal on Thursday after securing investment to restart an idled steelmill that has become symbolic of France's industrial decline, but he was later jostled by left-wing militants while out campaigning.
Sarkozy announced ArcelorMittal's owner Lakshmi Mittal had promised to invest 17 million euros ($23 mln) in the Florange plant, near the German border, whose plight has been politicised by the upcoming April-May presidential election.
Sarkozy and Socialist challenger Francois Hollande, who leads voter intention polls, are in rival quests to be seen as the saviour of the plant, which houses the last blast furnace in France's former steelmaking heartland.
Hollande visited the site last week and said if elected, he would pass a law forcing companies to sell unused factories to buyers who would keep them in operation.
Sarkozy sought to trump his adversary, saying the new investment would restart one of the plant's blast furnaces in the second half of 2012 -- even though ArcelorMittal said the steel mill's future would hinge on an economic recovery.
Things turned sour for Sarkozy later in the day when riot police had to break up a large crowd of left-wing militants and some Basque separatists, who heckled him, threw scrunched up political tracts at him and briefly penned him in as he visited the Basque city of Bayonne. Some threw eggs at the windows of a bar where he took refuge.
Arriving in Brussels later on for an EU summit, Sarkozy called the protesters "louts" and said: "I cannot imagine for a second that Mr. Hollande would not condemn these actions."
"In a democracy, one should be able to campaign without violence, without having people fight you or throw stones and eggs at you. These are not democratic actions and Francois Hollande would look better for condemning them," he said.
Addressing a campaign rally in the city of Lyon on Thursday evening, Hollande did not allude directly to the incident, but said there was no excuse for verbal or physical violence.
While short-lived, the protest was the latest in a series of setbacks for Sarkozy this week, after a blazing campaign launch two weeks ago helped him trim Hollande's opinion poll lead.
On Wednesday, Sarkozy worsened confusion over the fate of wounded French journalist Edith Bouvier in an embarrassing blunder where he said she had been evacuated from the besieged Syrian city of Homs thanks to tough negotiations, before backtracking and saying her whereabouts were unclear.
A day earlier, his credibility took another potential blow when France's Constitutional Court overturned a new law, making it a crime to deny that the mass killing of Armenians by Ottoman Turks was genocide. Sarkozy said he would submit a revised version, a response which risks fanning accusations the law was aimed at wooing Armenian-descended voters.
The 2012 election is a two-horse race between Sarkozy, on a platform of structural reform, and Hollande, who wants to hike taxes on high earners to fund investment in education and jobs.
While Sarkozy had a blazing campaign launch in mid-February, Hollande has grabbed back the limelight by proposing a largely symbolic 75 percent tax on annual earnings over 1 million euros.
With the sickly economy and industrial weakness at the heart of the election, both candidates have seized on Florange, whose two blast furnaces have stood idle due to a lack of orders since late 2011, putting the jobs of 500 of its 2,667 workers at risk.
"At the French state's request, ArcelorMittal will invest 17 million euros in Florange," Sarkozy told France Inter radio.
ArcelorMittal said it would spend 2 million euros ($2.7 million) improving one of the two furnaces, and 15 million euros on modernising the site and developing new products.
Sarkozy said ArcelorMittal was fully committed to France's steel industry and to the Florange furnaces. "ArcelorMittal has set a start-up date for the second half of this year," he said.
ArcelorMittal confirmed the investment, but a spokesman for the group said there was no guarantee the blast furnace would resume production unless steel demand recovered sufficiently.
"The restart of Florange will depend on whether there is an economic upturn this year," the spokesperson said.
Sarkozy, who has accused Hollande of "demagoguery" in seeking to exploit the plant's plight for electoral ends, also intervened last week to strike a deal with oil giant Royal Dutch Shell to keep an insolvent French refinery running.
French industry has bled jobs since the 2008 financial crisis, helping push the jobless total to a 12-year high.
Data on Thursday showed the jobless rate, including overseas territories, edged up to 9.8 percent in the last quarter of 2011 from 9.7 percent in the previous three months.
While surveys give Hollande a lead as big as 12 points for a May 6 runoff over Sarkozy, an IFOP-Fiducial poll on Wednesday showed Hollande's lead for the April 22 first-round had narrowed to 1.5 points from 5 points since Sarkozy's campaign launch.
($1 = 0.7501 euros) (Additional reporting by Matthias Blamont in Paris, Claude Cannellas in Bayonne and Paul Taylor in Brussels; Editing by Catherine Bremer and Ben Harding)