A judge in Nantes ruled that it was a “religious emblem” and incompatible with the French principle of “religious neutrality in public spaces”.
Town officials have reluctantly removed a figure of baby Jesus, plaster animals and a desk-sized stable they had erected in the local council building.
A local senator denounced the ruling.
France’s strict secularism laws mean that religious symbols are banned from public spaces such as schools, hospitals and local councils.
Secularism was a founding principle of the French Republic and was enshrined in a 1905 law separating Church and State.
“This decision is grotesque,” said Senator Bruno Retailleau in a statement.
“Next we’ll be banning epiphany cakes at the Elysee Palace.”
Bruno Retailleau also argued that it was unfair as in Paris the mayor hosted a dinner celebrating the Muslim month of Ramadan every year.
Jean Regourd, a member of the secular Free Thinking Society, lodged the complaint against the nativity scene but denied attacking a tradition that is now part of secular French culture.
“It’s a child in a stable with a cow and a donkey,” he said.
“It is clearly a religious symbol, there’s no doubt about it. And these local council buildings were built in the 1980s so there is no local nativity tradition to speak of.”
Bruno Retailleau has said he will appeal against the ruling but admits that keeping the nativity on display would be an “illegal act of civil disobedience”.
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