The amount announced was far below the 100 billion euros initially floated as the planned startup capital last month when Mr Sarkozy announced his French version of a sovereign wealth fund.

'We want to turn this crisis into an opportunity for development,' Mr Sarkozy said during a tour of the family-owned Daher aerospace equipment factory in the Loire valley.

'The banks are skittish and are not investing, so we will provide financing,' he said.

Last month, Mr Sarkozy announced the creation of the new investment vehicle that could protect French companies who could fall prey to a foreign takeover if their stock plummets during the looming recession.

On Thursday, he said the French fund was 'ready to forge alliances' with foreign-owned funds and argued that supporting industry was the best 'social policy' that his government could take in light of the economic crisis.

'In confronting this crisis, there are two strategies,' Mr Sarkozy argued.

'Either you stay locked up at home or you face up to the storm in an offensive manner.'

The fund will be managed by a state-run agency, the Caisse des Depots et Consignations (CDC), and be subject to parliamentary oversight.

France has a strong tradition of economic patriotism, with the state readily stepping in with huge bailouts for its industrial champions when they fall on hard times.

CDC president Michel Bouvard cautioned however that the fund would not be offering free handouts to any company that asks.

'No one thinks that the state can save every company regardless of its state or its capacity to bounce back,' Mr Bouvard told AFP.

Clear investment guidelines are to be formulated within the coming 'days", he said, underscoring the government's desire to move quickly.

The former head of pharmaceutical giant Sanofi-Aventis, Jean-Francois Dehecq, and Patricia Barbizet, the chief executive of the Artemis private investment group, were named presidents of the fund's two managing committees.

Mr Sarkozy has described the measure as a 'sovereign wealth fund", on the model of those controlled by energy-rich countries like Russia or Gulf nations with billions of dollars at their disposal ready to invest.

The funds, which are generally defined as state-controlled investment vehicles, have been around since the early 1950s but their ranks have swollen in recent years.

Their rise has been accompanied by fears in some European countries and Washington that the governments controlling sovereign wealth funds could use them to advance their own political and strategic aims.

Mr Sarkozy unveiled the measure last month alongside a raft of stimulus measures designed to promote an 'industrial response' to the credit crisis ravaging world economies.

He has said he wanted Europe as a whole to follow the French example, but Germany rejected the idea out of hand.

The International Monetary Fund estimates at between US$1.9 and US$2.8 trillion the amounts held in sovereign funds worldwide, but other monitoring groups have put the figure as high as US$5 trillion. -- AFP