By Mark John and Emmanuel Jarry
PARIS (Reuters) - French President Francois Hollande chose centrist Interior Minister Manuel Valls as his new prime minister on Monday, a coalition source said, replacing Jean-Marc Ayrault who quit after the ruling Socialists were trounced in local elections.
The 51-year-old Valls has been compared with "New Labour" former British premier Tony Blair both for his pro-business ideas and his dashing style. He is a bogeyman to the Socialist left, having proposed changing the party's name and criticised the flagship 35-hour work week it pioneered over a decade ago.
The choice of Valls, the Barcelona-born son of Spanish immigrant parents, suggested Hollande is set to amplify an EU-mandated shift towards pro-market economic reforms and public spending cuts rather than turn back as left-wingers demanded.
Political commentators have compared Valls, who has taken a tough line on crime and Roma migrants, with former conservative President Nicolas Sarkozy, who earned his spurs as a security hardliner in the same ministerial position.
Speculation of a cabinet reshuffle mounted after Ayrault acknowledged he and his ministers bore part of the blame for Sunday's defeat, which saw 155 towns swing to the center-right UMP and the far-right National Front claim 11.
The coalition source confirmed local media reports of Valls' nomination in a brief text message. Minutes earlier, Ayrault's office announced the prime minister had tendered his resignation to Hollande, who was to broadcast a recorded message to the nation at 8 p.m.
"I don't see how there won't be a major reshuffle," Francois Rebsamen, a Socialist senator and long-time Hollande ally, told Reuters, noting that polls show the French did not trust the government to turn around unemployment of more than 10 percent.
Facing the lowest popularity levels of any president in the 56-year-old Fifth Republic, Hollande changed tack earlier this year towards a more pro-business stance aimed at spurring investment and jobs through cuts in corporate social charges.
The president has said a mid-April vote in parliament on his "responsibility pact" package of 30 billion euros ($41.35 billion) in tax cuts for companies will also be a vote of confidence in his government.
Questions were raised over whether he would stick with the reforms as left-wingers said the record abstention rate in the town hall vote showed that working-class voters wanted Hollande to return to his Socialist roots and abandon the pact.
"Don't be afraid to abandon this path," said an open letter to Hollande posted on the website of Paris Socialist senator Marie-Noelle Lienemann and signed by fellow left-wingers Jerome Guedj and Emmanuel Maurel.
"Job creation comes from a re-launch of public investment and consumption," it said, urging Hollande to end a freeze on public sector salaries, raise the minimum salary and pensions.
Weeks before France must present the EU with new detailed plans to bring down its public deficit, the letter said the government should simply ignore the demands of the EU stability pact committing it to a deficit under three percent of output.
Data released on Monday showed the public deficit stood at 4.3 percent of gross domestic product in 2013, above the government's 4.1 percent target.
Provisional results from Sunday's voting showed the anti-EU National Front party of Marine Le Pen taking control of 11 towns across the country plus one district in Marseille, surpassing a past record in the 1990s when it ruled in four towns.
"Punishment", read a front-page headline in the left-leaning Liberation newspaper.
The National Front's wins were largely in the south, which has a tradition of anti-immigrant feeling. But it also took power in northern towns such as Henin-Beaumont and Hayange, which are suffering from France's industrial decline.
"This result is proof that we can win on a grand scale," Le Pen told BFM TV, adding that the vote showed her party could win European Parliament elections due in late May. Pollster Ipsos on Sunday put the FN narrowly behind the UMP for the EU vote, with the Socialists trailing in third place.
The FN now has a fresh chance to show it can be trusted with power after its attempts to run towns in the 1990s were widely judged to have exposed its failings, hurting its electoral fortunes for years afterwards.
In some consolation for Hollande, Socialists retained control of Paris city hall, with their candidate Anne Hidalgo due to become the first female mayor there.
(Additional reporting by Nicholas Vinocur, Pauline Ades-Mevel and Brian Love; Editing by Gareth Jones and Paul Taylor)