UPDATE 1-French minister wants Mittal out of France
* ArcelorMittal CEO to meet Hollande on Tuesday-source
* Deadline for talks on fate of blast furnaces is Dec. 1
* Montebourg later says ArcelorMittal will stay in France (Adds Montebourg comment, background)
By Nicholas Vinocur and Yann Le Guernigou
PARIS, Nov 26 (Reuters) - Steelmaker Mittal, which acquired France's Arcelor in 2006, is no longer wanted in France due to years of broken promises, Industry Minister Arnaud Montebourg said on Monday, intensifying a row over plans to close two furnaces in northeastern France.
Montebourg's attack on ArcelorMittal, which he later qualified, risks exacerbating tensions in a dispute that is central to Socialist President Francois Hollande's efforts to save jobs and reverse years of industrial decline.
It came after Montebourg, one of the most left-wing ministers in the government, said last week France could nationalise the company's Florange site on a temporary basis while the government tries to find a buyer.
ArcelorMittal, the world's largest steelmaker, has said it will shut down two blast furnaces at Florange from Dec. 1 unless the government can find a buyer to operate them.
"We no longer want Mittal in France because they haven't respected France," Montebourg said in an interview with Les Echos business daily published on Monday.
He said Chief Executive Lakshmi Mittal had told "shameful lies" since 2006 about the group's plans and had not kept his promises to the French government.
"The problem with the blast furnaces at Florange is not the blast furnaces at Florange, it's Mittal," he said.
A source close to Indian-born Lakshmi Mittal, who according to French media is due to meet with Hollande on Tuesday, told Reuters that management were "very shocked" at Montebourg's words.
"These are quite violent declarations against a company which employs 20,000 people in France," the source said.
Qualifying his statement later on Twitter, Montebourg said in a message that while ArcelorMittal's methods were questionable, the group would continue to operate in France, where it has more than 100 industrial sites.
Montebourg's back-pedalling was part of a pattern for the outspoken minister, who previously embarrassed the government by saying it would not allow Peugeot PSA to close a plant near Paris, only to retract the pledge.
Libya's sovereign investment fund, which Montebourg said in November was interested in acquiring a Petroplus refinery in northern France, denied on Monday having expressed interest in the refinery, according to Libya's Lana news agency.
The fate of Florange, situated in the former heart of French steel making country, became a symbol of France's flagging industry during campaigning for the May election and is now a test of Hollande's promise to reverse the decline.
Failure to save jobs at Florange would add to a list of industrial shutdowns, including Peugeot PSA's production site, and risks deepening fears in the public that the government is powerless to save jobs.
Unemployment is at a 13-year high of over 10 percent and October jobless claims due on Tuesday are expected to show another increase.
A spokeswoman for Montebourg was not immediately available to comment. ArcelorMittal, which employs some 20,000 people across France, declined to comment.
Last week, Montebourg said the government had received two offers from buyers interested in acquiring more than just the two blast furnaces, but gave no further details.
ArcelorMittal has denied having received any such offers.
A source close to the company said plans to shut down blast furnaces including those at Florange pre-dated the merger between Arcelor and Mittal, which had never promised to keep the site operating when it signed the deal in 2006. (Editing by Catherine Bremer and Sophie Hares)