PARIS: Former French prime minister Dominique de Villepin was acquitted Thursday on charges of plotting a smear campaign against long-time rival Nicolas Sarkozy in order to sabotage his presidential bid.

Villepin immediately vowed to return to the political fray, criticising Sarkozy's policies for "not giving results" and saying he would challenge the president from within the ruling UMP party that both men belong to.

He is now believed to be considering a run for president in 2012.

The court ruled there were no grounds to convict the 56-year-old politician of complicity to slander Sarkozy in 2004, when the two men were angling to succeed president Jacques Chirac.

The acquittal in this high-profile case was an outright victory for Villepin and a slap for Sarkozy who had reportedly vowed to hang those responsible for the scandal by a "butcher's hook."

"After many years of ordeal, my innocence has been recognised," Villepin said after walking free out of the Paris courtroom.

The silver-haired politician said he now looked forward to "serving the French people and contributing in a spirit of unity to the recovery of France".

Speaking on French television later on Thursday, Villepin said: "I want to offer an alternative to policies that I believe are not giving results."

"We need new ideas, new proposals.... Nicolas Sarkozy has his way. I think that there are other possible answers within the ruling majority," he added.

"I want to be above the traditional partisan divisions," he continued.

The verdict coincidentally came on Sarkozy's 55th birthday and while the president was chairing a meeting at the Elysee Palace to discuss measures to curb France's ballooning deficit.

The French leader is also struggling with poor approval ratings.

Villepin and four other defendants were accused of using falsified bank accounts to discredit Sarkozy ahead of his party's nomination for the 2007 presidential vote, which he won.

Sarkozy's name was on the bogus list of hundreds of account holders at the Clearstream financial clearing house who allegedly took bribes from the sale of French warships to Taiwan.

Villepin was cleared on all four counts in the case dubbed France's trial of the decade: complicity to slander, to use forgeries, dealing in stolen property and breach of trust.

Sarkozy, who was a civil plaintiff in the case, announced he would not appeal the decision but noted that the court had recognized that there had been a "serious conspiracy" despite Villepin's acquittal.

The spokesman of the UMP party, Frederic Lefebvre, said the court's ruling in its entirety should be taken into account because it "clearly highlighted the lies Dominique de Villepin told under oath."

Three other defendants were convicted: ex-aerospace executive Jean-Louis Gregorin who admitted to leaking the fake list to investigators, Imad Lahoud who confessed to adding Sarkozy's name to the list and accountant Florian Bourges, who obtained data on account holders that were later falsified.

Journalist Denis Robert, who introduced Bourges to Lahoud, was acquitted.

The sensational trial opened in September in the courtroom where queen Marie Antoinette was sentenced to the guillotine in 1793, with Villepin accusing Sarkozy of pursuing a personal vendetta against him.

Dubbed the Clearstream affair, the scandal made frontpage news across France when it broke in 2005 and Sarkozy, then Chirac's ambitious finance minister, long suspected that Villepin was behind an attempt to sabotage his Elysee bid.

Prosecutors had argued during the month-long trial that while Villepin did not deliberately take part in a plot to smear Sarkozy, he did nothing to stop the scandal from spinning out of control as he hoped to gain political capital.

They had sought a suspended jail sentence of 18 months and a 45,000-euro (70,000-dollar) fine for Villepin.

Best known for opposing the US invasion of Iraq at the United Nations when he was foreign minister, Villepin had argued in his defence that he never knew the list was false and never sought to use it against Sarkozy.

Villepin stepped down as prime minister in 2007 but has since carved out a role as Sarkozy's fiercest critic within the governing right-wing party.