* Reform is key to meet govt pledge on cutting deficit (Recasts with union attack on Woerth)

By Daniel Flynn and John Irish

PARIS, Sept 2 (Reuters) - Two unions intent on paralysingFrance with a strike over pension reform rounded on the ministerleading the overhaul on Thursday, questioning how he can do hisjob properly while he is surrounded by a political scandal.

Labour Minister Eric Woerth came out fighting earlier in theday, ruling out any watering down of major changes to theloss-making pension system, despite the prospect of strongsupport for next week's nationwide strike.

Woerth, who has been dogged throughout the summer byallegations of involvement in illegal funding, said hispolitical problems had not weakened his focus on the reform.

He has denied any wrongdoing in the affair involvingFrance's richest woman, L'Oreal heiress Liliane Bettencourt.However, on Thursday he admitted intervening in favour ofBettencourt's wealth manager to receive the prestigious Legiond'Honneur title.

The leaders of France's most powerful unions, the CGT andCFDT, who had kept their distance in the funding scandal, saidin a joint interview that Woerth was too preoccupied to focus onthe pension reform.

"I ask myself one question: how can he manage at the sametime the problems of the 'Bettencourt Affair' and the pensionreform?" CFDT leader Francois Chereque said in a preview ofFriday's Les Echos newspaper. "This situation means we are nottackling the heart of the subject. It's a real problem."

Woerth, architect of the reform which goes to parliamentnext week, said the government was ready to compromise on somedetails but would not abandon plans to raise the retirement age,a chief aspect of its drive to slash its budget deficit.

Unions convening the Sept. 7 strike -- which they say willdisrupt everything from public transport and schools totelecommunications -- say a government offer to relax rules onpeople who perform arduous labour, hold multiple pensions orstarted work young is not enough.

"This reform will be for decades and millions of employees,"CGT's Bernard Thibault told Les Echos. "We are the only countrywhere there is legislation on a social issue without anynegotiations taking place," he said.

The unions are calling on President Nicolas Sarkozy, whosepopularity is near record lows before elections in 2012, toditch plans to raise the full retirement age to 67 from 65.

"We are facing a strike which is obviously extremelyserious," Woerth told reporters. "But ... that will not changethe pension reform because if we introduce fundamental changes,there will be no pension reform."

Until now only the opposition Socialists had called Woerthinto question, but new allegations are appearing almost daily,deepening the government's embarrassment.

Sarkozy has been keen to maintain good relations with unionsand listen to their demands. But he appears to be heading for ashowdown, with most commentators saying he cannot afford to drophis minister, potentially delaying the reform.

Prime Minister Francois Fillon said on Thursday that Woerthwould see the reform through.


The government unveiled plans in June to overhaul thepay-as-you-go pensions system and clean up state finances,warning that without major changes the system would run upannual deficits of 50 billion euros by 2020.

France has committed itself to cutting its budget deficit to3 percent of GDP by 2018 from an estimated 8 percent this year.Even the Socialist party has recognised a fundamental reform ofthe pension system is needed.

Sarkozy's government, which trails the Socialists in opinionpolls, is trying to complete unpopular measures to cut nextyear's budget deficit and faces criticism over a crime crackdownwhich has targeted Roma, arousing dissent even within thecabinet.

On Wednesday, Chereque said unions were aiming for a protestat least as large as one in June which they say drew 2 millionpeople. Police say only 800,000 joined the protest. (Additional reporting by Jean-Baptiste Vey; Editing by DavidStamp)