The French finance minister, Dominique Strauss-Kahn, and Mr van Miert met in Paris last week to discuss details of a rescue plan. The aim is to separate the state-owned bank from its insane and corrupt past (no adjective is too strong) and prepare the chastened and modestly-profitable rump for at least a partial privatisation in the next two years. Details may be announced by the end of this month.
In return for the lorry loads of French taxpayers' money it has already received - the total cost of the disaster to the French state is officially put at pounds 10bn - Brussels insists that Credit Lyonnais must sell off some of its more profitable European activities. It is also insisting that the bank must be privatised in the near future. But, in a significant concession, it appears that the Commission is no longer pushing for a scaling down of the Credit Lyonnais retail banking operation in France or for the sale of the bank's relatively lucrative, remaining interests in Asia and the US.
It is the bank's retail operations, which account for around 10 per cent of the French retail market, that is so attractive to foreign investors like Lloyds TSB seeking to expand in Europe as the date for the introduction of the single currency approaches.
Overall, the Commission's aim is to create a fire-wall, once and for all, between the re-floated Credit Lyonnais - "the good bank" - and the institution created to cart away the bad debts and disastrous investments accumulated in the late 1980s and early 1990s, the "Consortium de Realisation" (CDR) - the "bad bank". The initial disaster was bad enough: a heady mixture of fraud, arrogance and incompetence, political interference and wild speculation. But the government rescue, which has been going on for five years now, has also been disfigured by dishonesty, bad management, evasion and secrecy. The CDR, created as part of the cure, became a kind of secondary infection, surrounded by allegations of incompetence and fraud in the sale of bad assets.
Originally, the separation between Credit Lyonnais and the CDR was structured to punish the "good bank", which handicapped its recovery and increased the bill to the French tax-payer. Then, without permission from Brussels, it was restructured by Paris in 1995 to subsidise the "good bank", which infuriated its competitors, both in France and the rest of the European Union.
The outline agreement between Paris and Brussels is supposed to preserve the principle of fair and unsubsidised competition in European banking, while allowing Credit Lyonnais to hold on to enough good assets to move smoothly out of the public sector. The Socialist-led coalition government in France has not formally committed itself to a complete sell-off. Having spent so much public cash putting things straight, it says the simple sale of Credit Lyonnais to a foreign buyer would provoke a political outcry in France. But Mr Strauss-Kahn has offered, as part of the deal with Brussels, the partial, or progressive, privatisation of Credit Lyonnais in the next two years.
The exact terms and timetable of this partial privatisation remain in dispute between Brussels and Paris. Mr Van Miert says the Commission is determined not to be "fooled again".
The whole truth of the Credit Lyonnais saga may never be known. There has been no proper, public inquiry and, given the scale of the public loss, remarkably little public outrage.
How did a sleepy state-owned institution come to be the largest bank in Europe, the largest in the world outside Japan? How did it come to own the MGM movie studios, at a time when the French government was campaigning against the iniquitous cultural imperialism of Hollywood?
How did it come to own golf courses in the US and part of the Canary Wharf office complex in the London docklands? How did it come to deal with a string of suspect businessmen, from Robert Maxwell to Bernard Tapie?
And how could it have lost at least pounds 10bn (some French parliamentarians insist that the final bill will be nearer to pounds 17bn)?
The story has some similarities with the Savings and Loans (S&L) debacle in the United States in the 1980s: a deadly combination of, on the one hand, deregulation and speculation and, on the other hand, the false- confidence generated by the knowledge that the state would pay the final bills for losses.
Within this financial never-neverland - as with the S&L crash in the US - petty and grand larceny thrived. There is also some evidence, once again paralleling the S&L saga, that some dubious activities were encouraged by politicians and money siphoned off to pay for political campaigns or for personal use.
It was President Francois Mitterrand who first encouraged Credit Lyonnais to go for rapid growth in the late 1980s. His ambition was to give France a global financial player, capable of matching or eclipsing Deutsche Bank in Germany.
But Credit Lyonnais was staffed, at the top, in the traditional but now discredited French way, with senior, fast-track civil servants and political appointees, not with bankers. It was led through its crazy years by a man called Jean-Yves Haberer, who had graduated brilliantly from the elite civil service college, the Ecole Nationale d'Administration, and gone on to head the French treasury.
A senior accountant from another EU country, who worked in a Credit Lyonnais subsidiary in the final years of the debacle, says the prevailing atmosphere was one of bureaucratic empire building. Deals were judged, not on profitability or on the balance of risk, but on the scope for aggrandisement of the institution or individual fonctionnaires. To this was certainly added outright fraud - up to pounds 1bn worth - and political manipulation.
The man who brought the whole pack of cards down was an Italian businessman called Giancarlo Paretti, who extracted around pounds 1.4bn from the bank over two years.
His purchase of MGM in 1990, with the bank's cash, immediately went to the bad; Credit Lyonnais sold the studio back to its original owner for a loss of around pounds 700m.
Mr Paretti was close to the Italian Socialist party, which was close to the French Socialist party. There is much evidence that his favourable treatment by Credit Lyonnais was politically manipulated. His first office in Paris was in Socialist party headquarters. It is alleged that Italy bought high-speed trains from France in return for soft treatment of Mr Paretti by Credit Lyonnais.
Such connections, and similar connections with the French centre-right, may never be fully unravelled. The criminal investigations underway are hopelessly over-burdened and under-staffed.
One of the two judges in charge complained recently that she had to answer 60 telephone calls a day and had not even got a secretary. A mysterious fire at the Credit Lyonnais headquarters in 1996, which destroyed some of the documentary evidence, was, it turns out, no mystery. It was started deliberately, in two separate places.Reuse content