President Emmanuel Macron has decided to take the STX shipyard at Saint-Nazaire in Brittany into temporary public ownership, Le Monde newspaper reported on Thursday.
Economy Minister Bruno Le Maire later confirmed the move, saying that it was to "defend France's strategic interests" but stressing that it was only temporary.
Earlier on Thursday government spokesman Christophe Castaner said the government's aim was not to nationalise STX and that Le Maire's threat to do so the previous day was part of the negotiating process with Italian company Fincantieri.
"It's quite usual that the government should up the ante," he told French TV. "It's as in diplomacy. You have to have some weapons [...] It allows you to negotiate better."
And a government source told Le Monde that the long-term objective was not to keep the shipyard in public ownership but to "gain time" after Fincantieri rejected a French proposal of 50-50 ownership.
Le Maire said that negotiations with the Italians would start again on Tuesday.
Rival bids for French shipbuilder
The French state already holds a 33 percent share in the shipyard, where famous ocean liners such as the France, the Harmony of the Seas and the Queen Mary 2 have been built.
After a period of crisis in the industry, business at Saint-Nazaire, which directly employs 2,600 people and provides work for more than 4,000 others, has picked up and the order book is now full.
But STX, the South Korean conglomerate that had a majority share in the shipyard, recently went bankrupt and its creditors put its French subsidiary up for sale.
There was only one bidder - Fincantieri, Europe's biggest boat-builder and a historic rival to Saint-Nazaire.
A South Korean court approved the Italian company's offer of 79.5 million euros for a 66.6 percent share of the capital, a deal that was to come into effect on Saturday.
But politicians and unions feared that Fincantieri would transfer jobs to Italy and technical expertise to China, given that it has a technology-transfer agreement with the China State Shipbuilding Corporation.
Opponents of the deal also claimed that France's sovereignty was under threat since Saint-Nazaire is the only shipyard to build large warships for the French navy.
Under the previous French government a deal was reached that allowed Fincantieri 48 percent ownership but also given a Trieste-based foundation seven percent.
France proposed 50-50 share
On being elected in May, Macron scrapped this deal, apparently believing the Trieste company was Fincantieri front.
The French government then proposed a 50-50 division, leaving Fincantieri the right to name the yard's bosses, but Rome turned that option down.
On Wednesday Le Maire told the Italians that, if they did not accept that offer, the French state would exercise its right to buy up the 66 percent share they are bidding for.
So, according to Le Monde, the government has decided to take the yard over at a cost of 80 million euros, but only as a temporary measure.
French support, Italian anger
Opposition politicians have already declared their support for such a move.
"It's not a problem of nationality, it's a problem of competition. The biggest competitor is the Italian," right-wing Senator Bruno Retailleau, who is chairman of the regional council that covers Saint-Nazaire, told RTL radio.
"The national and strategic interest of the Saint-Nazaire shipyards justifies the state getting involved," Socialist MP Boris Vallaud said.
Macron's stance has been less well-received in Italy.
"The new occupant of the Elysée gives a poor image of himself," La Stampa newspaper commented, asking why it was deemed acceptable that a Korean company hold 66 percent of a French company but not that an Italian holds 51 percent.
The position does seem to be something of a reversal of Macron's enthusiastic support for market solutions to economic and social problems.
During the final presidential election TV debate in May, he mockingly accused far-right candidate Marine Le Pen of proposing to nationalise the Whirlpool white goods factory threatened that was threatened with closure.
But a civil servant who has worked with the president told Le Monde that, like former economy minister Arnaud Montebourg who unsuccessfully tried to take over the Florange blast furnaces to prevent their closure, Macron stands in the French tradition of state intervention in the national interest.
And, after all, the takeover, if it takes place, is only supposed to be temporary.