By Michel Rose
PARIS (Reuters) - Humbled by French President Francois Hollande's recent cabinet reshuffle, Economy Minister Emmanuel Macron will struggle to keep a reformist agenda alive as the Socialists focus on looming political battles.
Macron, one of the government's youngest members at 38, has been the face of reforms for France's European partners and international investors.
He has sought to "unblock" heavily regulated sectors of the economy and to tackle the rigidity of the French labor market, which protects those with permanent jobs and leaves many temporary workers on the fringes of society.
But he has drawn the ire of many leftists in the ruling Socialist party with his free-market rhetoric.
That's why Hollande, who is keen to get re-elected in 2017, has made room members of the Green party in his cabinet, but did not give the popular Macron a more powerful portfolio.
Politicians and pundits quickly noticed he had actually been demoted two places in the cabinet protocol order.
"It's probably a political signal that's being sent to him after this crime of lese majeste," said Gael Sliman, head of the Odoxa polling institute, referring to recent comments appearing to criticize the government's focus on security issues.
Still unelected, Macron's lack of a political base means he has found it difficult to convince Hollande to speed up the modernization of the eurozone's second-biggest economy.
A draft labor market reform bill looks more ambitious than expected and, judging by initial reactions among Socialist deputies, it faces a tough passage in parliament.
The former Rothschild banker has shot to the position of France's most popular minister despite being virtually unknown two years ago.
Named economic adviser by Hollande at the beginning of his term, he once quipped that the Socialist's 75 percent tax on millionaires would turn France into "Cuba without the sun" and played a role in the president's economic U-turn 3 years ago.
Shortly after he was named economy minister in 2014, he criticized the 35-hour workweek dear to the left, saying it had been wrong to think "France could get better by working less".
More recently he was uncomfortable with the debate about Hollande's plans to strip convicted terrorists of their French nationality.
Each time, his piques have stirred up a fuss among politicians and commentators, but also cemented his reputation as a rare plain-speaking politician among the public.
With a popularity rating of 42 percent in an Elabe poll this month, he was the most popular politician on the left, dwarfing Prime Minister Valls' 27 percent and Hollande's 21 percent.
Though Hollande has not muzzled him, Macron's hands have been tied on the reform front. "He does well in the polls but he has no political weight," said Francois Miquet-Marty, head of the Viavoice polling institute.
His first reform plan to allow more shops to open on Sundays and liberalize sectors such as transport and legal professions was rammed through parliament last year to demonstrate France's reform zeal to its euro zone partners.
However, a second deregulation bill, dubbed "Macron 2", was chopped up and distributed to other ministers, which was seen as a sign of Valls' fear of his minister's growing profile.
"After the Charlie Hebdo attack and the November attacks happened, Valls was not only deprived of his reformer image by Macron but also deprived him of his 'Mr Security' image by Hollande," the source close to Macron said.
"That accelerated the tension between Valls and Macron."
But analysts say Macron's place in government is secure as he helps boost Hollande's appeal to centre-right voters ahead of next year's presidential elections.
Whether Macron agrees to play Hollande's reformist mascot until the end of his term remains an open question. He may be tempted to stay on to consolidate his popularity in view of longer term ambitions, such as 2022 presidential elections.
"It's very hard to leave when everybody tells you you're the most popular member of the government and people start talking to you about a potential presidential run," the source close to Macron said.
(Writing by Michel Rose; additional reporting by Paul Taylor, Ingrid Melander and Elizabeth Pineau; Editing by Tom Heneghan)