By John Irish and Lamine Chikhi
PARIS/ALGIERS (Reuters) - President Francois Hollande travels to Algeria on Wednesday to try to heal wounds left by a bloody war of independence half a century ago and to seek greater access to the former colony's oil wealth in an attempt to lift France's own flagging economy.
The trauma of the 1954-1962 Algerian war, in which hundreds of thousands were killed, left deep scars in both countries which continue to hamper a partnership that Paris believes could help revive the Mediterranean basin.
With France's own economy spluttering, it is launching a diplomatic drive it hopes will not only strengthen trade ties but improve security cooperation, as it pushes for intervention against Islamists who have seized control of northern Mali.
Hollande will bring senior executives from some of France's top firms including oil major Total, which is vying to sign a $5-billion-deal to build an ethane steam-cracking plant. Renault will also discuss plans to build a factory to produce some 75,000 cars a year.
"The irony in all this is that Algeria will be helping France come out of its recession," said Rachid Tiemcani, a political science professor at the University of Algiers.
With 12 billion barrels of oil reserves, Algeria is the world's largest Francophone nation, yet annual trade with its one-time colonial master is just 10 billion euros. As Algiers diversifies its economy, China, Spain and Italy have eroded France's market share, despite 132 years of colonial history.
"The message is to look to the future," Foreign Minister Laurent Fabius told Reuters. "The past exists. We shouldn't tear the page up but turn it."
Paris and Algiers are also likely to ratify a defense agreement that would allow French defense contractors to bid for major arms deals, a market closed to France until now. That should improve intelligence cooperation as international efforts to oust al Qaeda-linked Islamists from Mali gain momentum.
Hollande, who won office in May, pledged to break with his predecessor Nicolas Sarkozy's tough immigration and security policies, seen by many as stigmatizing France's 5 million Muslims, many of whom are of Algerian origin.
Sarkozy was considered too hostile towards Algiers, a stance which deepened resentment of France in immigrant-heavy suburbs.
"There are a huge number of French of Algerian origin and that represents a challenge. The question is how to ensure this population becomes an asset in economic and cultural ties," said French historian Benjamin Stora.
A deal will be signed to ease visa requirements for Algerians travelling to France. Paris issues about 200,000 visas a year compared to 1,000 in 1999, the nadir of bilateral ties.
"All that interests me is getting a visa, the rest is just talk," said Ahmed Mesbah, a student at Algiers University.
While there is a desire in Paris to heal the wounds left by the war, 58-year-old Hollande has limited room to maneuver.
A formal apology for its colonial past is a sensitive issue as many French citizens who lived there prior to independence - known as "pieds noirs" and who fought in the French army against Algerian insurgents - oppose the idea, as do former loyalist Muslim volunteers known as "harkis".
"There isn't a desire for an apology from the French government," said French Minister for War Veterans Kader Arif, the son of a Harki. "That doesn't mean that on both sides of the Mediterranean we can't look at our history with lucidity."
Hollande, who spent eight months working at the French embassy in Algeria in 1978, has already made some gestures, setting March 19 as an annual remembrance day for the Algerian war.
He has also admitted that Algerians were massacred at an independence rally in Paris in 1961, ending decades of silence over a police crackdown historians say may have killed more than 200 people.
In response, Algerian President Abdelaziz Bouteflika has appeared conciliatory, telling media it was time to "transcend some onerous episodes" to forge a "strong and dynamic relationship". (Additional reporting by Julien Ponthus; Writing by John Irish; Editing by Mark John and Andrew Osborn)