French bank chief may go if euro falls

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The Independent Online

The fate of France's powerful central bank governor, Jean-Claude Trichet, rests today on the market forces that he has frequently defended from political interference.

After his implication in a government cover-up of a banking scandal eight years ago, Mr Trichet may be the cause of further speculation against the euro when money markets open in the US and Asia today. The French bank chief was in line 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.

If he is seen to cause further weakness for the euro, Mr Trichet will come under pressure to resign as Banque de France governor and ECB heir-apparent. Although he has not been charged with any wrong-doing, Mr Trichet will shortly be mis en examen, or placed under judicial investigation, for allegedly lying to the markets in his previous job at the Finance Ministry.

As central bank governor for the last five years, he has been a powerful voice for a strong franc and a strong euro and one of the few French government figures to argue for respect of market forces.

Mr Trichet - his name means, phonetically, "to cheat" - stands accused of approving a falsified balance sheet for Crédit Lyonnais, a state-owned bank, when it ran into financial difficulties in 1992.

As the director of the Trésor, a regulatory department at Finance Ministry, he is accused of hiding the scale of the bank's losses - which were listed in its accounts as £180m although the true figure is alleged to be £4.5bn - during an election year.

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 wrong-doing at Crédit Lyonnais.