Chirac veers left to smooth path for favoured successor De Villepin

President Jacques Chirac has entered what may be his last full year in politics by veering significantly to the left. M. Chirac, a connoisseur of U-turns and zig-zags, has used new year receptions to announce a flurry of left-leaning policies, including a radical shift in the financing of health and social security spending. He has 17 months remaining in his second term and his poll ratings are at a record low.

The sharp turn is seen as an attempt to fulfil M. Chirac's last remaining political ambition: to ruin the presidential chances of his former protégé, the Interior Minister, Nicolas Sarkozy.

President Chirac, 73, weakened by health problems and his defeat in the referendum on the EU constitution last May, has probably abandoned hope of a third term. By embracing ideas from trades unions and the centre-left opposition, M. Chirac is preparing for an aggressively centrist, and even leftist, campaign next year by his preferred successor, the Prime Minister, Dominique de Villepin.

M. Sarkozy has called for a "rupture" with a "failed" French political and social model and a move towards a lower-spending, less intrusive state. But all the new policies announced by M. Chirac this week are intended to suggest the French model of high-spending and generous welfare protection is compatible with a forward-looking, ground-breaking country.

The intention seems to be paint the popular M. Sarkozy as an ultra-liberal ideologue and a threat to the French way of life. "Let's escape from this endless debate on the 'French model'," President Chirac said. "You don't change what you are."

He has also set hi-tech ambitions, such as the development by 2030 of a new "cleaner" fourth generation of nuclear reactors and the abandonment of fossil fuels by French rail and bus services by 2025.

He has also raided the thinking of the trade union federation, the CGT, once Communist-affiliated, to propose the biggest shift in social policy financing for 60 years.

The French health service, and pensions and unemployment benefits, are funded by separate taxes - or social security contributions - which fall heavily on both employers and employees. The system is partly blamed for the stubbornly high rate of unemployment (just under 10 per cent). The social security system is also hugely in deficit.

M. Chirac has proposed that a proportion of employers' contributions to the social security fund should no longer be based on the number of people a company employs. Instead, payments should be based on the "value added" by a company, including its investments and foreign earnings.

This would push a larger part of the social security budget on relatively "low-employment" industries in fields such as finance and new technologies. "High employment" industries would be relieved of part of their costs, potentially creating many jobs. But opponents warned such a switch could force companies, and foreign investment, to move from France.

M. Chirac picked up another union idea for individual rights to "permanent training", to allow employees to switch jobs more easily. He also promised a €2bn (£1,377m) a year state loan fund for promising start-up and small companies.

In another gesture to the left, the President has promised to scrap a law smuggled through parliament last year by right-wingers in his party.

It calls for history taught in French schools to dwell on the "positive" record of French colonisation, especially in north Africa. That caused anger in the French Carib-bean islands of Guadaloupe and Martinique and damaged relations with Algeria. M. Chirac wants to "calm tempers".