* ArcelorMittal withdraws French site bid for EU-funded project
* Move throws into question a deal to preserve Florange site
* Steelmaker, govt say agreement intact but locals, unions angry
By Yves Clarisse and Catherine Bremer
PARIS, Dec 6 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 pilot project in less polluting steel 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 "green steel" project was being permanently abandoned, nor that the deal with the French government had been undone.
But unions and local politicians reacted angrily.
ArcelorMittal, which has been under fire for months in France over its plan to permanently shut its 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," it said, adding: "This in no way means the ULCOS project is being abandoned."
Ayrault, whose government was appointed by Francois 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.
Yet in the best 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 its mothballed Florange furnaces in viable working order.
"We've been conned. They are liars," Michel Liegbott, a Socialist lawmaker for the surrounding Moselle region, told BFM television. "They should have said what they are saying today six months or a year ago."
CFDT trade union leader Edouard Martin told French media that ArcelorMittal had "misled everybody" and vowed to restart the fight to keep Florange operational.
Ayrault's own industry minister, leftist Arnaud Montebourg, had made waves before the deal was struck by accusing the steel firm's Indian chief executive Lakshmi Mittal of telling "shameful lies" and saying he was no longer welcome in France.
Last week's agreement, under which ArcelorMittal has committed to preserving some 630 jobs at the two blast furnaces, was a crucial test of Hollande's pledge to stem a run of industrial layoffs and also 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".
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