France's powerful finance ministry is passing into the hands of Herve Gaymard, until now farm minister and a close ally of President Jacques Chirac, the presidential palace announced, marking the end of eight months of financial initiatives by Nicolas Sarkozy.

Gaymard, 44, comes to the finance ministry already with extensive experience in financial matters, having held numerous positions in the higher echelons of French government including undersecretary of finance.

Sarkozy, 49, is bowing out of the government cabinet to take charge of the ruling UMP party after Chirac gave Sarkozy the choice of remaining minister or heading the party but not both -- as the ambitious, younger politician had wanted.

Sarkozy is widely seen as a rival to the authority of Chirac and as the leading centre-right candidate to stand to replace him in presidential elections in 2007.

Gaymard, a graduate of France's highly selective Ecole Nationale d'Administration (ENA), Gaymard fits the classic mould of France's ruling elite better than Sarkozy.

The outgoing minister cherished his image as a hard-knuckled, self-made lawyer and reformer although his period at finance was also marked by some high profile intervention in the economy.

Although the move will likely diffuse political tensions between the presidential palace and the finance ministry, analysts saw it having little impact on economic and budget policy.

Economist Emmanuel Ferry at French brokerage Exane describe the cabinet reshuffle as a political move that would result in "more budget slippage" and which had "no big reform on the agenda".

Gaymard will inherit from Sarkozy a number of pressing dossiers on how to get France's finances into order while supporting slowing economic growth.

In particular, Sarkozy leaves Gaymard with the huge task of wrestling the public deficit within the eurozone limit of three-percent of output. Sarkozy, in his last weeks at the ministry, presented a draft budget showing a big cut in the public deficit, a big enough reduction to reduce it to 2.9 percent of output next year, provided growth does not dip.

Gaymard will also have to decide whether to push ahead with tax cuts promised by Chirac during his re-election campaign at the risk of making it impossible to cut the deficit.

He will also have tough decisions in pressing on with part privatisation state assets, especially the huge state-owned power group Electricite de France, whose powerful unions have so far helped keep the company away from the stock market.

In any case, Gaymard will have a rough time showing the energy Sarkozy had stitching up deals on all sorts of dossiers such as with EU competition authorities on state-aid or big retailors on lowering their prices.

Although Sarkozy came to the finance ministry with a reputation as free-market minded reformer, he quickly displayed great energy arranging interventist deals to save struggling French engineering group Alstom and pushing French drug firms Sanofi-Synthelabo and Aventis to merge into a so-called national champion.

Gaymard's job at the agriculture ministry is to be taken by current budget minister Dominique Bussereau, with goverment spokesman Jean-Francois Cope stepping into Bussereau's post.

Health Minister Philippe Douste-Blazy and France Telecom chief executive Thierry Breton had also been tipped as candidates to head the finance ministry.