Sarkozy said he would ask parliament to set up a commission to look at creating guidelines "to avoid all forms of conflict of interest in the future".

The president also said he was determined to carry out unpopular plans to raise the retirement age to 62 from 60 and make people contribute longer for a full pension despite expected protests in September.

Properties raided

The president went on prime time television to try to restore battered confidence in his government just hours after police searched the home of Liliane Bettencourt, France's richest woman.

Bettencourt, the L'Oreal cosmetics heiress who is a close friend of Sarkozy, has been named in the donations scandal which has rocked the government and driven the president's approval ratings to a record low.

A former accountant for Bettencourt has told police that the billionairess and her late husband made illegal cash donations to conservative politicians for years, including for Sarkozy's 2007 election campaign.

During the interview, the president insisted France was not corrupt but there had been too many bad habits in politics, and he was determined to clean them up.

The searches of the properties of Bettencourt, 87, and Francois-Marie Banier, a society photographer and close friend of Bettencourt, came amid calls for the appointment of an independent magistrate to investigate the case which also involves alleged tax evasion.

Sarkozy rejected any suggestion that the public prosecutor in charge of the case, who is a personal friend of his, was not independent.

In all, police carried out seven raids on Monday, the public prosecutor's office said.

In a gesture of courtesy to the Bettencourt, the prosecutor's spokeswoman described the police action at her villa in the exclusive suburb of Neuilly as "a visit to take receipt of documents".

Allegations denied

Claire Thibout, the former bookkeeper, has accused Woerth of taking an illegal $200,000 cash donation from Bettencourt's wealth manager.

The minister and the wealth manager have both denied the allegation.

The finance ministry's tax inspectorate concluded in a report rushed out on Sunday that Woerth had not intervened in the tax affairs of the Bettencourts, or their wealth manager or friends during Woerth's previous role as budget minister which he left in March.

Woerth was treasurer of Sarkozy's campaign and remained UMP treasurer while serving as budget minister in charge of tax matters, and his wife worked for Bettencourt's wealth manager, prompting accusations of conflicts of interest.

In the television interview, Sarkozy tried to refocus public attention on the pension reform and the need for budget savings to bring down a public deficit of 8 per cent of gross domestic product and public debt of more than 80 per cent of GDP.

He reaffirmed that France would keep its promise to cut the deficit to 6 per cent of GDP next year and 3 per cent in 2013.

The funding scandal contributed to the government's loss of an ultra-safe parliamentary seat to the left in a by-election on Sunday.