"In signing these two accords, our countries have set the seal on genuine long-term mutual confidence," Fillon said in a speech to Algerian students.

Along with deals on banking and insurance aimed at improving the climate for business exchange, the package was signed in the presence of Algerian premier Abdelaziz Belkhadem.

The two countries signed a preliminary nuclear energy pact in Algiers in December 2007, during a visit to Algeria by French President Nicolas Sarkozy.

Algeria had already signed similar nuclear energy deals with the United States and Russia. Similar pacts have also been agreed by the United Arab Emirates, Libya, Tunisia and Jordan.

Since 1995, Algeria has had two experimental nuclear reactors, both of which are monitored by the International Atomic Energy Agency.

Saturday's deal centres on an exchange of knowledge in education, research and opening the possibility of French-backed nuclear energy generation in Algeria.

The military accord, labelled "historic" by Fillon, also specifies cooperation on resources and training. Five years after negotiations began, it envisages "industrial partnership in the field of armaments."

A military source said Algeria would gain access to helicopters and warships.

With those deals out of the way, Fillon can now turn to the tricky task of trying to convince Algerian President Abdelaziz Bouteflika to sign up to Sarkozy's cherished Mediterranean Union project.

Algeria has raised concerns notably over Israel's membership, as a fellow Mediterranean rim country, as well as the sharing of funding reponsibilities between European Union and north African or Middle Eastern candidate countries.

Sarkozy is due to launch detailed plans on July 13 in Paris, but Bouteflika has yet to commit to attending, and no-one expects a formal decision during Fillon's visit, which ends Sunday.

Ahead of face-to-face talks, however, Fillon said he was confident that Algeria, "a key country... will commit fully" to the fledgling strategic bloc.

"It's in Algeria's interests, as it is with all the countries on the Mediterranean rim," Fillon said, citing "civil protection, the fight against maritime pollution, the development of solar energy, support for small- and medium-sized enterprises, as well as general peace and prosperity."

Belkhadem underlined the need for better bilateral relations, particularly concerning freedom of movement for nationals between both countries. France has stepped up deportation of illegal immigrants, which is of concern to its former colonial territory.

Equally, French businesses are fretting over the security climate in Algeria, where a French engineer was killed in a bomb attack on June 8, for which Al-Qaeda's North African branch later claimed responsibility.

Fillon told two Algerian daily newspapers Saturday that French businesses and nationals "can and must remain in Algeria and live there, side by side with the Algerian people. There is no question of repatriation," he added.

He also called on Algeria, a major OPEC oil producer, to aid dialogue between producer and oil consumer countries aimed at limiting the potential for economic shocks.

"It is very important that consumer and producer countries have a more frequent, more profound and more efficient dialogue to avoid wild variations in prices," Fillon said.

"These shocks can significantly slow the world's economy, which we all suffer from," he added on the eve of a Saudi gathering of crude producers and consumers.

Looking to the Jeddah talks, Fillon called for "short-term" increases in Saudi output as well as greater price transparency and "genuine efforts towards energy efficiency."

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