French President Nicolas Sarkozy said Monday that France's colonial system was "profoundly unjust," in a step toward ending decades of rancor between France and Algeria, once the crown jewel among French colonies. "Yes, the colonial system was profoundly unjust, contrary to the three founding words of our Republic: liberty, equality, fraternity," Sarkozy said at the start of a three-day state visit to Algeria. It was a bold admission, as France has steadfastly refused to bow to entreaties, notably from Algeria, to apologize for an era marked in some colonies by humiliation and brutality. However, the visit comes with tensions between the two countries running high, just as Sarkozy hoped to seal billions of euros (dollars) in contracts with the gas-rich North African nation. Sarkozy announced that more than â‚¬5 billion (US$7.3 billion) in contracts were scheduled to be signed Tuesday. He mentioned infrastructure projects, including a long-stalled subway for Algiers, but agreements regarding gas projects also were expected to be concluded. An accord on "civilian nuclear energy" was scheduled to be initialed, Sarkozy told French and Algerian business leaders without elaborating. The friction over the colonial era has complicated ties between Paris and Algiers for years. Tensions increased last week when Algeria's veterans affairs minister, Mohamed Chedif Abbas, said last week that Sarkozy won the spring presidential election because he was backed by a "Jewish lobby." Sarkozy responded Monday with an appeal for both France and Algeria to fight "all forms of racism." "There is nothing that more closely resembles anti-Semitism than Islamophobia. Both have the same face: that of stupidity and hate," said Sarkozy, whose maternal grandfather was Jewish. Addressing the colonial era and the brutal eight-year war of independence, Sarkozy went part way toward satisfying the longtime demand of Algiers, including of President Abdelaziz Bouteflika, for Paris to apologize for its actions as the colonial ruler. But Sarkozy declined to have France assume full responsibility for the brutality of the war, which led to Algeria's independence in 1962. "Terrible crimes were committed throughout an independence war that left numberless victims on both sides," Sarkozy said. Today, he said, "it is all of the victims that I wish to honor." Sarkozy added that, despite the colonialism, "It is also just to say that inside this profoundly unjust system there were many men and women who profoundly loved Algeria, before being forced to leave." In Algiers, portraits of Sarkozy and Bouteflika lined the main avenues of Algiers, belying the cool political climate the leaders hoped to put behind them in favor of lucrative deals. "I came to Algeria to build ... an exceptional partnership between our people, and that happens by way of contracts," said Sarkozy. "The past exists. The future is to be built." The French and Algerian presidents planned to sign a partnership treaty - what aides called a "simplified" version of a friendship treaty that was frozen after France passed a 2005 law spelling out the "positive" effects of colonialism. The law was rescinded but rancor accumulated nevertheless. The trip was Sarkozy's first full state visit to Algeria since he was elected in May, though he made a brief working visit in July. He is accompanied on the trip by 150 business leaders and eight ministers.