The French government Friday night withdrew its threat to nationalize a part of the ArcelorMittal steel plant after it reached a deal with the steel group which agreed to continue investing in the plant and avoid layoffs.  

Prime Minister Jean-Marc Ayrault said that ArcelorMittal had committed to investing $234 million in five years and would avoid forced layoffs in the plant site at Florange, eastern France, the AFP reported.

"The government decided against the idea of a temporary nationalization that was floated in recent days," Ayrault told reporters, three hours before a midnight deadline to strike a deal.

According to the deal, status quo will continue regarding the two closed blast furnaces for now, considering the weak demand, but employees will not be laid off and will be absorbed in a future project in which both the company and the government are partners.  

ArcelorMittal, controlled by Lakshmi N. Mittal, and the French government had been engaged in verbal battle after the company said it would have to close the two blast furnaces at the site which had remained idle for months owing to the weak demand.

The company said that restarting the two furnaces that had remained suspended for the past 18 months was not economically viable as the French steel industry was struggling with overcapacity and the weak local demand.  However, the closure of the blast furnaces would translate into loss of jobs for about 650 employees which was a cause of concern for the government.

Furious over the prospect of job losses, the government led by President Francois Hollande said that it would nationalize the plant to protect jobs.

The government said three days ago that it would take over the plant till the government found a buyer and had set a deadline for the company to withdraw from the plant, triggering huge criticism from the investors.

The dispute reached its peak Monday when the French Industrial Renewal Minister Arnaud Montebourg accused the steel group of blackmailing France. They were “no longer welcome in France,” he reportedly said. His comments evoked a strong criticism from business circles and foreign investors.

However, the workers unions at the Florange site were not happy of the development. "We've been betrayed," Martin Edouard, a member of the CFDT union at the Florange furnaces, told reporters.

"This is unbelievable, if that's what politics is about, what a joke," said Walter Broccoli of the FO union, according to Reuters.