Beleaguered Cresson says she won't quit

THE European Union's internal crisis is back as Brussels braces itself for a crucial report tomorrow, the consequences of which could shape the future of the EU's institutions for years to come.

But with Edith Cresson, the abrasive European Commissioner at the heart of the row, resisting mounting pressure to quit, the row over sleaze, nepotism and cronyism in Europe is again threatening to spiral out of control.

When MEPs threatened to vote to expel the entire Commission in January, it was the creation of the committee of "wise persons" which staved off disaster. But now the day of reckoning is at hand and MEPs are preparing to demand at least one high-profile resignation, if another attempt to sack the lot is to be avoided.

Increasingly the dispute between Parliament and Commission has focused on Ms Cresson, who has lost the support of a large proportion of fellow- socialist MEPs. With only days to save her job, the former French premier has been trying something new and rather different: a charm offensive. Selected journalists have dined in her Brussels apartment and heard Ms Cresson's side of the story.

Emollience is not the Cresson style and, over three courses of plain country cooking, the former French premier puts the campaign against her down to political intrigue or a German-inspired conspiracy. She has hinted that the French security services are investigating dirty tricks and shows no intention of resigning, even if the committee of "wise persons" criticises her as expected tomorrow.

Judged on the facts, Ms Cresson's departure ought to be cut and dried. Investigations into the Leonardo da Vinci youth programme, for which she is responsible, reveal a catalogue of mismanagement, dubious practice and suspected fraud. Its administration was contracted out to a company called Agenor, the subject of an audit report which makes extraordinary reading, with details of overpayments, bogus invoices and phantom workers.

Agenor's director was paid more than pounds 6,000 a month and his wife, the head of personnel, earned more than pounds 3,800 a month - "an exceptionally high salary for a person without an academic degree or qualification relevant to the post" according to investigators. Last month the Commission axed the company and Belgian police began a formal fraud investigation.

Ms Cresson is accused of nepotism, after appointing a friend to the obscure post of scientific visitor. Rene Berthelot came from the town of Chatellerault, which Ms Cresson ran as mayor, and his background as a dentist hardly seemed to qualify him for the post. In place for only one month before suffering a heart attack, Mr Berthelot stayed on the payroll, earning a total of around pounds 60,000.

Ms Cresson has denied the most serious charge, that she sought to block the recovery of money paid to Mr Berthelot for work never performed. The joke in Brussels is that if you call her office, the switchboard is liable to say: "I'm sorry, Ms Cresson's line is busy. Can I put you through to her dentist?"

Few institutions take themselves as seriously as the European Parliament and MEPs still picture the scene in January when Ms Cresson and Manuel Marin, the bearded Spanish vice president of the Commission, emerged as the main targets in the row over sleaze.

Irregularities are well-documented in his present and former portfolios, including a help project for Mediterranean countries, and the humanitarian aid programme, from which up to pounds 420m remains unaccounted for from the years 1993-5. Mr Marin stood before MEPs, gravely admitting mistakes for which he wholeheartedly apologised, but insisting he was not corrupt. It was a Clintonesque performance, oozing wounded, confessional sincerity. By contrast Ms Cresson sat and delivered a stony rebuttal of the claims against her.

Her determination to stay should not take us too much by surprise because, during Ms Cresson's brief prime ministership of France, she resisted fierce pressure to quit until she was fired by Francois Mitterrand.

But her defence reflects the scale of problems confronting a beleaguered European Commission. Agenor is one of a number of private companies contracted to perform Commission work because of insufficient staff. While few would argue that all of the 17,000 Brussels bureaucrats are being stretched, attempts to re-structure seem doomed by political objections.

Ms Cresson does not see much wrong with employing a friend. In France political patronage is hardly unheard of and in Brussels, where rules are fluid, no one tried to stop her. That highlights another failing in a polyglot administration which lacks agreed political standards. As one senior official puts it, there is "a melee of political styles. I wouldn't say the lowest common denominator rules, but it certainly isn't the highest either".

Which gets to the nub of the Cresson defence: things are just as bad, if not worse, in other parts of the Commission, so why should she be sacrificed on the altar of Eurosceptism? She suspects a plot, aided and abetted by Jacques Santer, president of the Commission, to use her as a scapegoat. All this has, she contends, been stirred up in Germany, where hostility to Europe is increasing, to discredit the EU and bolster the case for lowering Bonn's financial contributions to Brussels.

As a conspiracy theory this is far-fetched, but questionable practice is systemic and widespread. The Portuguese commissioner, Joao de Deus Pinheiro, employs his brother-in-law as deputy chef de cabinet, one of the most senior positions in the private office. Mr Pinheiro's wife is also an employee of the Commission, as is the spouse of Mr Marin. Even those generally regarded as scrupulous are now under suspicion, including Erkki Liikanen, the Finnish budget Commissioner, whose wife's work as a civil servant involves regular contact with the European Commission.

None of which adds up to a reason why Ms Cresson should escape a humiliating departure. But if the committee of "wise persons" lives up to its title, an entire administration could find itself in the firing line.