France's new President Francois Hollande and his companion Valerie Trierweiler leave the Elysee Palace after the handover ceremony in Paris.

Paris - The government of France's new President Francois Hollande is likely to be dominated by moderate social democrats after party leader Martine Aubry, overlooked for the prime minister's role, said on Wednesday she would not be in the cabinet.

Aubry, daughter of former European Commission president Jacques Delors and on the left of the Socialist Party, who was once tipped to be its candidate in the presidential election, made it clear she was unhappy to accept a consolation post.

Jean-Marc Ayrault, a veteran social democrat, took over as prime minister and was due to announce his cabinet later on Wednesday. Another moderate, Michel Sapin, is tipped to become finance minister, a post he held almost 20 years ago and critical in dealing with the euro zone debt crisis.

Another option is Hollande's presidential campaign director, Pierre Moscovici, an English speaker who was junior European affairs minister in a previous Socialist-led coalition.

Aubry was the architect of France's 35-hour week as labour minister in the last left-wing government of 1997-2002. She was quoted as telling newspaper Le Monde: “I talked with Francois Hollande. He said he had settled for Jean-Marc Ayrault. We agreed that under this configuration my presence in the government made little sense.”

Hollande had been expected to find a heavyweight job for Aubry, a rival finalist in the Socialist party primary, because of her experience and the need to hold together a fractious party.

The Finance Ministry post has long been expected to go to Sapin, a long-time friend of Hollande, who wants to move away from blanket austerity which he says risks plunging the euro zone into deep recession and introduce measures to stimulate growth.

Moscovici, another possible contender, is a graduate of the elite ENA civil service school, has a good command of English and enough clout to represent France on the world stage. He is also tipped as a possible successor to Foreign Affairs Minister Alain Juppe, if that job does not go to Laurent Fabius.

Fabius was prime minister at just 37 in 1984 under former Socialist President Francois Mitterrand and served as finance minister for ex-Prime Minister Lionel Jospin in 2000-2002.

But Fabius has been dismissive of Hollande in the past and clashed with him in 2005 when he campaigned for a “No” vote in a referendum on a European Constitutional treaty that Hollande supported.

Manuel Valls, a young law-and-order Socialist, is seen as a likely choice for interior minister.

The changeover from a conservative administration does not appear to have rattled markets for now, despite Hollande's vow to plead against excessive austerity in debt-stricken Europe.

Demand was solid on Wednesday at a first bond auction since Hollande took office, with the yield on the benchmark five-year bond hitting a record low of 1.72 percent as political turmoil in Greece drove investors towards the safehaven of French debt.

A day after Hollande was sworn in, doubts still hung over many cabinet choices as senior Socialists and up-and-coming party members jockeyed for jobs.

A leading candidate for industry minister is Alain Rousset, a strong advocate of decentralisation in charge of the Lorraine region, who wants to emulate the success of Germany's federal states in promoting investment in technology, or Arnaud Montebourg, 49, a left-wing critic of globalisation, who threw his backing behind Hollande in the party primaries.

A top choice for defence minister, overseeing plans to withdraw French troops from Afghanistan by end-2012, is long-time Hollande friend Jean-Yves Le Drian. But Fabius could be given the portfolio if passed up for foreign affairs.

In keeping with his concern for gender parity, Hollande is seen choosing Aurelie Filipetti, 38, for culture minister, while spokeswoman Najat Vallaud-Belkacem, 34, is likely to get a junior post fighting discrimination.

The cabinet line-up could yet be changed after parliamentary elections next month depending on how well the left fares and whether it needs to bring in coalition partners. - Reuters