PARIS (Reuters) - President Francois Hollande aims to lay out plans for the French economy on Tuesday but a news conference is set to be dominated by talk of his private life after his partner went into a hospital following reports he had an affair.
His New Year's encounter with journalists in his Elysee Palace will be his first public appearance since a celebrity magazine on Friday published photos it said showed Hollande making a nocturnal visit to French film actress Julie Gayet.
His office complained of breach of privacy but did not deny the affair. The saga took a surprise new turn on Sunday when it emerged that his long-term partner, Valerie Trierweiler, had been admitted to hospital in a state of shock.
Hours before the news conference, it was the personal saga, rather than the economy, that dominated French news broadcasts.
The episode threatens to undermine the authority of Hollande, a Socialist who has already become the least popular French president in modern times, even as he aims to revive a stalled economy by cutting taxes on business, a lurch to the political centre that has irked unions and left-wing allies.
"This major political event must remain a major political event," David Assouline, spokesman for Hollande's Socialist party, said of the 1530 GMT news conference, an annual setpiece which could last as long as two hours.
Rivals also said the scandal should not take the president's focus off of policy announcements: "This is not a soap opera," Jean-Louis Borloo, leader of the centrist UDI party, told BFM television.
"With nearly a third of his mandate gone, it's about time he seriously laid out how he plans to turn the country around - even if it's not exactly going to be rock 'n' roll."
Hollande plans to use the event to detail a proposed "responsibility pact" with business in which firms will be offered tax cuts and less red tape in return for hiring commitments aimed at reducing 12 percent unemployment.
But the reports of the affair are likely to hijack the agenda. A similar event staged by predecessor Nicolas Sarkozy after his 2007 divorce was dominated by curiosity over his romance with singer Carla Bruni, whom he subsequently wed.
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Although France does not have an official First Lady title, Trierweiler has her own office in the Elysee, a chauffeur and adviser, and accompanies Hollande on visits. Many pundits say it is legitimate now to question what her actual status is.
"She knows it must be cleared up because the debate has turned political," Frederic Gerschel, a reporter for daily Le Parisien, told RTL radio after speaking to Trierweiler.
Her office said she would remain in hospital for the time being, with an aide saying she needed "peace and quiet".
Signalling the growing disquiet among Hollande's allies over the matter, Socialist senator Francois Rebsamen advised Hollande to scrap the function now occupied by Trierweiler.
"This arrangements are outdated and out of keeping with the times and should be ended - he even said it himself once," Rebsamen, a close ally of Hollande, told RTL radio.
Argentinian film director Santiago Amigorena, ex-partner of Gayet, told French radio that whatever had gone on between the actress and Hollande, "there was no wrong done, no deception".
Worries are growing in the euro zone that France, its second-largest economy, will hold back a nascent recovery - fears borne out by December manufacturing data that showed a strong pick-up in most countries except France.
France's blue-chip CAC 40 stock index - home of bellwethers such as drugmaker Sanofi, cosmetics group L'Oreal and oil major Total - is down 0.8 percent, the worst performance among European bourses in 2014.
Philippe Varin, chief executive of troubled carmaker PSA Peugeot Citroen, urged Hollande to cut taxes on companies and to follow countries such as Canada and Sweden in making welfare spending more efficient.
"(For growth) you need improved competitiveness, which is only possible with better corporate margins which in turn are crucial for investment and therefore job creation," Varin told Le Figaro newspaper.
(Additional reporting by Blaise Robinson and Elizabeth Pineau; Editing by Peter Graff)