President Sarkozy set in motion the privatisation of Areva, the world's biggest builder of nuclear power stations, today as he asked officials to assess plans for a merger with Alstom, the French engineering group.

The tie-up would create a Gallic giant with a stock market value of €40 billion (£27.2 billion) and global reach in sectors ranging from energy to trains.

The move illustrated Mr Sarkozy's determination to adopt a hands-on approach to the economy despite his reputation in France as a liberal

But it set Paris on collision course with Berlin, which is keen for Siemens, the German engineering group, to maintain a 34 per cent stake in Areva Nuclear Power, Areva's subsidiary specialising in nuclear reactors.

HSBC bank and McKinsey, the consultants, were reported to have been appointed to advise the French authorities on options for the nuclear group.

'We have big plans for nuclear energy,' Mr Sarkozy said at a meeting with Angela Merkel, the German chancellor at a meeting in Meseberg, in north east Germany on Monday

'I confirm we are reflecting on the future of the energy sector,' said David Martinon, Mr Sarkozy's official spokesman. 'It is a long- term strategic reflection but there is no urgency.'

His comments drove up Areva's price on the Paris stock by 2.6 per cent as investors sought to get their hands on a free float of just four per cent. Alstom's price soared by 6.47 per cent.

The French State controls 87 per cent of Areva, largely through the Atomic Energy Commission. The Caisse des Depots et Consignations, the state savings bank, holds four per cent and EdF, the state electricity supplier, two per cent.

Areva was created in 2001 from the merger of France's Atomic Energy Commission with Framatome, the reactor builder, and Cogema, the nuclear fuel specialist.

Anne Lauvergeon, its chairman, has won plaudits for turning it into a competitor for Westinghouse, the American group, with sales of €10.9 billion last year.

Mr Sarkozy offered her the post of Finance Minister in his Government following his election in May, but she refused.

The French president is known to want to merge Areva with Alstom under an industrial strategy designed to give France global champions.

The tie-up would place Bouygues, the French construction group which owns 25 per cent of Alstom, at the heart of process and leave Martin Bouygues, its chairman, as the dominant figure in the new group.

Mr Bouygues is a close friend of Mr Sarkozy's and the god-father of his son, Louis.

Under a scenario drawn up by the Atomic Energy Commission, Bouygues would end with 26 per cent of the merged company, and the commission itself would own 30 per cent.

Kelpler Equities said in a note: 'The transformation process of Areva is starting and could lead to a larger and more powerful group.'

However, there is resistance in the French administration to the privatisation of Areva's nuclear waste treatment and uranium enrichment activities.

Berlin is also hostile to what German officials suspect is a French plot to freeze them out of Areva.

The French group has an option which runs until 2012 to buy Siemen's stake in Areva Nuclear Power.

But Mrs Merkel made clear her determination for Siemens to retain its stake when she met Mr Sarkozy.

Relations between Paris and Berlin have already been strained by Mr Sarkozy's interventionism, which was illustrated last week when he forced Suez, the franco-belgian utility, to shed its environment business ahead of a merger with Gaz de France.

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