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France's German-speaking PM tries to reassure Berlin

By Stephen Brown and Noah Barkin

BERLIN (Reuters) - France's German-speaking prime minister offered a worried Berlin reassurances on Thursday that his government would reduce the deficit and prevent France from becoming the next victim of the euro crisis by applying a new economic model.

Jean-Marc Ayrault, making his first visit to Berlin since Francois Hollande became president, told Chancellor Angela Merkel that France would find its own way to reduce spending and boost economic growth and jobs, rather than copying Germany.

"My challenge, the government's challenge, is to reform what isn't working, to correct what is too weak, but to keep the profound values that make France what it is," he told a joint news conference after talks with the conservative chancellor.

"The job that is under way is constructing the new French model," said Ayrault, a Socialist.

A Reuters report that Merkel's finance minister had asked the German government's economic advisers to consider preparing policy recommendations for France has stirred outrage in Paris.

But Merkel said she would never dare to evaluate the decisions of the French government and added diplomatically: "We want a strong France just as France wants a strong Germany, so that together we can become a strong Europe."

Ayrault also held a 20-minute meeting with German Finance Minister Wolfgang Schaeuble, who emerged saying Germany and France did not "grade" each others' economic policies.

But it was clear French pride had been stung. Ayrault told a conference in Berlin organized by the Sueddeutsche Zeitung newspaper that his host country Germany also had its problems.

AFTER MERKOZY

"The German population is ageing quicker than the French, which poses problems for pensions and social security," said the French premier. "This sort of understanding for other countries' problems - I expect it for my own country too."

Paris is under intense pressure to improve French economic competitiveness relative to Germany and southern European countries that have implemented painful reforms to bring down their own debt in the face of a crippling three-year crisis.

German officials are worried that without bolder reforms, France could get sucked into the crisis - which has forced bailouts of Greece, Portugal and Ireland - in what would be a crushing setback for the bloc's efforts to stem the turmoil.

In response to calls by industrialist Louis Gallois for cuts in labor charges to reverse decades of industrial decline, the French government has now announced plans to grant companies 20 billion euros in annual tax credits to lower labor costs.

Ayrault cited this as one example of the "courage" France's Socialist government was showing on economic reforms.

His knowledge of Germany and its language may have been one of the reasons for his appointment. Relations between Merkel and the new president are often contrasted with the close partnership - especially on the euro crisis - that she enjoyed with Hollande's conservative predecessor Nicolas Sarkozy.

Hollande criticized Merkel's focus on austerity for the euro zone during his election campaign and the new Franco-German leadership couple have not got off to the best start.

"The main thing is to build a personal relationship," Ayrault said, adding that although the two governments belonged to opposing political factions, their relationship had to be "ueberparteilich" - the German word for non-partisan.

Ayrault and Merkel both rejected suggestions that the French premier's plans to meet Germany's centre-left opposition Social Democrats on Friday - less than a year before federal elections when Merkel will seek a third term - undermined this ideal.

"The important thing is for us to work together well," said Merkel.

(Additional reporting by Annika Breidthardt, Gernot Heller and Elizabeth Pineau; Writing by Stephen Brown; Editing by Gareth Jones and Mark Heinrich)

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