Trichet set to take top job at ECB

French Bank Governor poised to succeed Duisenberg after being cleared of false accounting charges
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The Independent Online

Jean-Claude Trichet will almost certainly be confirmed this week as the new custodian of the euro after a court in Paris cleared him yesterday of all charges of false accounting.

The French government said that it would renew M. Trichet's candidacy to succeed Wim Duisenberg as governor of the European Central Bank (ECB) when EU leaders meet at a summit in Thessalonika, in northern Greece, from today.

The job was virtually promised to sixty-year-old M. Trichet five years ago. The succession was thrown into doubt by his trial, earlier this year, for allegedly covering up the magnitude of the losses of the floundering bank, Crédit Lyonnais, when he was a senior finance ministry official in Paris in the early 1990s.

The tribunal correctionel in Paris yesterday dismissed all charges against M. Trichet and similar accusations against the former World Bank governor, Jacques de Larosière, who was head of the the Banque de France at the time.

Three former senior executives at Credit Lyonnais were convicted of falsifying accounts to minimise the then state-owned bank's losses from imprudent loans and acquistions, which eventually cost the French taxpayer €31bn £21.6bn). All three were given fines and suspended jailed sentences.

M. Trichet, who declared himself to be "very moved" by the decision to clear him, is highly regarded in the internationational and financial community. The EU heads of state and government are almost certain today or tomorrow to confirm his appointment as successor to M. Duisenberg, who is due to retire next month.

On the strident insistence of the French President, Jacques Chirac, it was agreed five years ago that the next "Mr Euro" would be a Frenchman. If M. Trichet had been convicted yesterday, EU leaders would have faced a tricky decision on whether to honour this agreement since there was no other credible, French candidate.

Despite his pedigree as an official in the French finance ministry, traditionally regarded as a shrine of "colbertisme" or state interventionsim, M. Trichet is a devout believer in the need for market-opening reforms in European economies. As European central bank governor, he would be expected to encourage the existing trend in the ECB away from an obsession with inflation and towards policies to encourage growth.

M. Trichet, whose name means phonetically in French "to cheat", was originally cleared of all responsibility for the Crédit Lyonnais affair by the state prosecution service last year. He was sent for trial with eight others on the insistence of the examining magistrate who led the investigation.

As head of the treasury department in the ministry of finance in 1992-3, he approved accounts for the imprudent and struggling, state-owned bank which, it later emerged, had enormously inflated its assets and earnings. M. Trichet insisted in court that they had no way of knowing that the books had been cooked. He placed the blame partly on the then Socialist government, which had encouraged Crédit Lyonnais to become an international player, acquiring assets in the US, including the MGM studios and the Aspen ski slopes.

Evidence presented to the court earlier this year suggested there had been collusion between government and bank to minimise losses but there was no indication of M. Trichet's personal involvement.

The affair has ironic echoes of the Enron and other accounting scandals which have shaken confidence in the US economy. It was alleged that French officials came under pressure to disguise the true scale of the expansive and disastrous investments of Crédit Lyonnais, especially its ill-advised purchase of MGM. At the time of the Crédit Lyonnais debacle, American and British commentators said this was typical of what happened when the state tried to run a private company while when the Enron and other scandals broke out last year, French commentators fingered them as an example of the dangers of unregulated capitalism.

One vast difference is apparent, however. The first of the prosecutions in the Enron affair have already been concluded whereas in France, the Crédit Lyonnais investigation, prosecution and trial took a decade. Once again, as in the ELF affair and other high profile investigations in France, the most senior figures have escaped conviction.

Despite the paucity of the evidence aganst M. Trichet, this will be taken by some in France as further evidence that the political and administrative élite enjoy a de facto legal immunity. Another French court confirmed an earlier judgement yesterday that senior officials who were allegedly involved in a cover-up of the presence of HIV-contaminated blood in French blood banks in the 1980s should avoid prosecution.