The powerful French central bank governor, Jean-Claude Trichet, is under pressure to resign to prevent another run on the euro, following the announcement that he is under judicial investigation for lying to the market.
The accusation goes back eight years to his previous job in the French finance ministry. Mr Trichet had been expected to take over the leadership of the European Central Bank (ECB), which runs the euro, when the currency comes into everyday use in two years' time. Such a promotion now seems impossible, leaving the French government's strategy for influencing the direction of the ECB and euro in tatters.
Mr Trichet remains, however, an ex-officio senior member of the board of the Frankfurt-based bank. Some French newspapers yesterday urged him to resign as governor of the Banque de France to forestall another fall in the euro when the money markets re-open in America and Asia tomorrow.
Mr Trichet, 57, has an unfortunate name for a banker. In French "tricher" means "to cheat". But, until now, he has had a reputation as incorruptible, a strict monetarist and a man capable of withstanding pressure from politicians.
He stands accused of approving a falsified balance sheet for the state-owned bank, CrÃ©dit Lyonnais, when it ran into enormous financial difficulties in 1992. As the then director of the TrÃ©sor, one of the key regulatory departments within the finance ministry, he is accused of "diffusion of false information to the market and the presentation and publication of incorrect company accounts". He is expected shortly to be formally placed under investigation by an examining magistrate, one step short of a charge.
The official accounts for CrÃ©dit Lyonnais that year showed a loss of £180m. It is alleged that the real figure, following a disastrous series of property investments and other foolhardy decisions, was £4.5bn. Eventually the bank collapsed, with losses to the French taxpayer of an estimated £10bn.
It is suggested that Mr Trichet was part of a conspiracy, at the highest levels of the then socialist government, to disguise the losses of CrÃ©dit Lyonnais for as long as possible. An election was due in 1993 and the government did not want to admit the need to pump huge amounts of public cash into the floundering bank.
Mr Trichet denies the allegations, claiming that he has documentary proof that he was one of the first senior officials to blow the whistle on incompetence and wrongdoing at CrÃ©dit Lyonnais. However, the allegation - lying to the market - could not be more damaging for a man who has ambitions to run Europe's currency. French judicial procedures move so slowly that it is unlikely that the Trichet case will be settled within the next two years.
Three years ago President Chirac angered his European partners by insisting that the European Bank governor, Wim Duisenberg, stand down halfway through his term in 2002 to make way for Mr Trichet. It was informally agreed this would happen but other EU governments can now be expected, with some schadenfreude, to refuse to implement the deal.Reuse content