By Catherine Bremer

PARIS (Reuters) - A right-wing politician vying to head France's opposition conservative party has raised a storm by suggesting Muslim youths tear pain au chocolat pastries from children's hands during Islam's fasting month.

The controversy has inflamed old strains over secular and mainly-Catholic France's struggle to assimilate Muslim culture.

Jean-Francois Cope, who is challenging a moderate rival to lead the main opposition conservative UMP party, made the allegation of bullying by young Muslims in front of an audience of supporters last week.

"There are areas where children cannot even eat their 'pains au chocolat' because it's Ramadan," Cope said, referring to an incident allegedly reported to him a few years ago by the mother of a child whose pastry was snatched at his school gate.

The remark, with its evocation of one of France's best-loved breakfast treats, has provoked accusations that Cope is seeking to boost his appeal with the hard-right of his UMP party and so raise his chances of winning next month's leadership contest.

"(Cope) has never hesitated in going too far when it's in his interest," said Budget Minister Jerome Cahuzac, a leading figure in Hollande's Socialist government.

The comment has also drawn fire from UMP moderates, with ex-minister Francois Baroin calling it "toxic". Even National Front leader Marine Le Pen weighed in, sniffing that Cope was trying to mimic his mentor, ex-President Nicolas Sarkozy.

"He only notices the reality of racism when he is in a political campaign," Le Pen told France 5 TV.

Yet Cope insists he is taking the lid off a real problem of anti-white racism. In a recent book, he relates an incident in the northern town of Meaux where he is mayor in which a woman was robbed by Arab youths who yelled: "Get lost Gaul woman".

Attitudes to immigration from largely North African former colonies since independence are complex and France, a secular nation of 65 million people, has struggled in the past to assimilate its 5 million-strong Muslim community.

France is also home to a well-established Jewish population of 600,000 that is Europe's largest.

While a study by the INSEE statistics institute released this week found 90 percent of children born to immigrants felt quite French, a survey by pollster TNS Sofres found 56 percent of respondents agreed with Cope that tensions in mixed-faith areas were a problem.

A PASTRY AND A CHAT

Muslims in the northern Paris suburbs said Cope seemed to be stirring up the issue of ethnic intolerance for political gain.

Abdel Hamza, 39, a bank employee, called it ridiculous.

"On the other hand, Cope is pretty clever to make this into an issue. He knows it will make the government uncomfortable, that it puts them in a difficult position," he added.

Hollande has taken a tough line on crime in immigrant-heavy areas since taking power in a May election where security was a key voter concern, but he is also under pressure to bring down rampant unemployment among Arab youths in poor suburbs where opportunities are few.

"There is an urgent need to help these young people, because the far-right is trying to stir up tensions," said Leila Leghmara, a centrist politician in the suburb of Aubervilliers.

Seeking to ease tensions over the issue, the CCIF association that fights Islamophobia set up a stand in Paris's St Lazare station on Wednesday handing out free pains au chocolat to commuters and offering to discuss the issue.

CCIF volunteers said only one passer-by made an offensive remark as they handed out some 400 of the chocolate pastries.

"We got a warm welcome and lots of supportive comments. People told us they are fed up with petty remarks by politicians that stigmatize Muslims," said Marcia Burnier, 26.

"We dispute the idea that there is tension between Muslim and Jewish groups. The issue is France accepting its diverse communities." ($1 = 0.7751 euros)

(Additional reporting by Nicolas Vinocur and Sophie Louet; Editing by Mark John)