President Sarkozy today promised €26 billion (£22.6 billion) of state aid and investment to revive the economy and help France's big car industry stave off collapse in the face of foreign competition.

"This crisis is an ordeal, a painful ordeal and a terrible ordeal, but we have to keep faith in the future," Mr Sarkozy said, in a solemn speech delivered by a Renault factory at the northern town of Douai.

Mr Sarkozy's plan focuses on investment. However, among measures aimed at consumers, car owners will be offered a €1,000 bonus for trading in vehicles older than 10 years and buying low-polluting models. A billion euros will go to financing credit for car buyers.

A sales slump has forced Renault and Peugeot-Citröen, France's two car giants, to temporarily lay off thousands of workers and close factories.

Mr Sarkozy promised to do more for the motor industry if the US government moves in a big way to bail out Detroit. He also attacked once again the EU's competition rules, saying states should have more room to aid firms.

"If our American friends do more for their own industry, I won't let the French automobile industry be disadvantaged compared to its competitors," he said.

Most of the money in the two-year plan is aimed at the construction industry, which will be helped by a €6.5 billion investment programme. The government is also injecting €11.5 billion into the economy through tax credits and rebates for business.

In addition, some four million low-wage earners will receive a gift of €200 and €1.6 billion of interest-free mortgages will be made available for lower-income buyers of new homes.

The rescue package, which Mr Sarkozy presented in patriotic tones, is the grandest gesture in two months of crisis management which have won him a spectacular return to popularity. Last month, after co-ordinating the European Union's salvage effort as the EU's current chairman, he launched a national sovereign wealth fund to protect French industry from predators.

France should not become like Britain and other states that have sold off their industry to focus on services, he believes. “The day we stop building trains, aircraft, cars and ships, what is left of the French economy? I will not turn France into a reserve for tourists,” he said last week.

Unlike most of its neighbours, France has so far escaped formal recession, teetering on the edge with 0.5 per cent growth last month. However unemployment is rocketing and Mr Sarkozy is pessimistic in private, saying that he fears social unrest.

Investment in industry and infrastructure such as highways and railways is Mr Sarkozy's priority. “In the current exceptional circumstances, we have a historic responsibility to improve France's facilities, infrastructure, universities and research," Mr Sarkozy said.

The revival plan shifts from Mr Sarkozy's attempts a year ago to stimulate demand with tax cuts. It will drive France deeper into debt, pushing the deficit to nearly 4 per cent of GDP in 2009. This is well above the 3 per cent limit normally demanded by the European Union.

Mr Sarkozy's approval ratings have gone positive for the first time in a year. Cabinet Ministers have offered gushing praise for the monarchical President. Laurent Wauquiez, the Minister for Employment, said: “Faced with the international economic storm, the President has come across as Captain Courage firmly grasping the helm.”

The President has benefited from the absence of any effective opposition, since the Socialist Party has been paralysed, with a fight for leadership that was only partially resolved with the appointment of Martine Aubry last week.

The party attacked his rescue package today as insufficient, aimed excessively at industry and unhelpful for ordinary people.

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