President Hugo Chavez said the firms' workers would be given help to set up co-operatives and re-start production for the benefit of the community.

He said the move was needed to fight poverty and end Venezuela's dependence on "the perverse model of capitalism".

Some business leaders fear it may lead to a wider attack on private property.

'Perfectly productive'

Speaking on his weekly television programme, Mr Chavez said the measures were necessary.

"It's against our constitution," he said. "Just as we cannot permit good land to lie uncultivated, so we cannot allow perfectly productive factories to stay closed."

The Venezuelan leader said that more than 700 companies in the country were idle.

Of these, 136 were being examined for possible expropriation and a small number were already in the process of being taken over, he said.

The president's TV show was broadcast from a cocoa-processing plant in eastern Venezuela, which is re-opening as a workers' co-operative after shutting down nine years ago.

'Dictatorial powers'

But Mr Chavez did hold out an olive branch to employers.

He said more than 1,000 firms in Venezuela had partially closed down simply because of economic difficulties.

"We want to work with you to help restore your production," he told company owners.

Venezuelan business leaders have expressed concern that government policies on land reform and co-management in industry could signal the beginning of a wider attack on private property.

Earlier on Sunday, Venezuela's most senior Roman Catholic Cardinal, Rosalio Castillo, accused the president of acquiring dictatorial powers.

But in his broadcast, Mr Chavez again insisted that Venezuelans have a clear choice.

"Either capitalism, which is the road to hell, or socialism, for those who want to build the kingdom of God here on Earth," he said.