Pieter, the private key is never made available in any form to the sshd
server. The server only has access to the public portion of the key in
~/.ssh/authorized_keys. You would probably not want a file on the
filesystem to serve as the secret key for your encrypted directory, as
that defeats the point of encrypting the directory in the first place.

Thanks

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https://bugs.launchpad.net/bugs/362427

Title:
  Public key ssh auth doesn't work with my Encrypted Home Directory

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