France expected to head EU financial services - envoys

By Julien Toyer and John O'Donnell

BRUSSELS (Reuters) - A former French foreign minister is expected to take charge of financial services in the European Union, diplomats said, a move that would unsettle bankers worried he may take a hard line with the industry.

EU diplomats said a deal to install Britain's Catherine Ashton as the bloc's foreign affairs chief foresaw Frenchman Michel Barnier becoming its commissioner for internal markets, a powerful role that covers financial services.

The job carries significant influence in the aftermath of the global economic crisis as the commissioner will broker agreements on tough new rules that span banker pay to restricting investment banking.

"It is practically done -- 99 percent," one diplomat told Reuters, playing down rumours that financial services would be removed from the internal market portfolio in the Commission, the 27-country bloc's executive arm.

"It is part of the deal," a second diplomat said. "Now that the British have secured the nomination of Ashton, one could logically think that they won't block the internal market portfolio going to Michel Barnier."

A spokesman for the Commission denied a deal had been concluded and said its president, Jose Manuel Barroso, had not yet agreed the line-up.

"There is no deal. President Barroso has made no final decision yet on the make-up of the new Commission," he said. "He is awaiting the final nominations and once this has happened he will discuss portfolios in the coming week."