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Banker pressed to resign to protect euro
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, Crédit Lyonnais, when it ran into enormous financial
difficulties in 1992. As the then director of the Trésor, 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 Crédit 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
Crédit 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 Crédit 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.
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© 2000 Independent Digital (UK) Ltd. | ||||||||||||||||||||
