By Elizabeth Pineau and John Geddie
PARIS/LONDON (Reuters) - The two main left-leaning candidates in France's presidential election are holding talks on possible cooperation, a move that could potentially put one of them in contention to reach the crucial election runoff.
Should Socialist Benoit Hamon and hard-left candidate Jean-Luc Melenchon decide to join forces, opinion polls suggest their combined vote might put them in with a chance of facing the far-right's Marine Le Pen in the second round of voting on May 7 - a scenario that has not been explored by major surveys in recent months.
"We are having discussions and we will continue to have discussions," Hamon said on France Info radio.
"We have talked and we will talk again today," he said, acknowledging that the talks would be "difficult".
Melenchon, who quit the Socialist party in 2008 to form his Left party and has won the backing of the Communists for the presidential vote, has repeatedly said he will not step down in favor of Hamon, with whom he has major policy differences.
Hamon, who in January won a Socialist primary on a far-left platform, has tended to sidestep the question when asked.
Opinion polls put combined support for the two men at levels which, if combined, could potentially be enough to reach the runoff between the two top-scoring candidates.
Investors fear that a hard-left Socialist candidate such as Hamon would fare worse against the anti-EU, anti-immigrant Le Pen than other centrist contenders.
The candidates currently seen as most likely to face Le Pen in the second round are centrist Emmanuel Macron, favorite according to the polls, and Francois Fillon, second favorite. Both are seen beating her to the presidency.
Hamon was on a first round score of 14-14.5 percent and Melenchon 11.5-12 in a Cevipof poll on Thursday.
A second-round place for Hamon or Melenchon would create a new dynamic in the runoff, which opinion polls consistently indicate would most likely be against Le Pen.
However, there are major disagreements between the two, notably on the European Union. Melenchon is hostile to some of its treaties and wants them revised, but Hamon favors further convergence.
"It would not be easy. He knows it as I do. What clearly separates us is the European ideal," Hamon said.
The premium investors pay to hold German government debt over French debt jumped after Hamon spoke.
"These suggestions that we will have talks between Hamon and Melenchon ... would be a real game-changer for the presidential election," said Natixis strategist Cyril Regnat said.
France's 10-year government bond yield was up 3 basis points on the day at 1.04 percent, and the yield spread over Germany rose 8 bps to 73 bps. [GVD/EUR].