Politician says scandal is 'French Watergate'

PARIS - Dominique Strauss-Kahn, a possible contender in the 2007 French presidential election, said the government risked its own "French Watergate" over an alleged smear campaign that involves top politicians.

The comment comes after President Jacques Chirac and Prime Minister Dominique de Villepin on Friday denied any implication in the so-called Clearstream smear against Interior Minister Nicolas Sarkozy, a presidential hopeful and Villepin's rival.

Strauss-Kahn, a Socialist Party member and a former finance minister, told French TF1 television on Sunday that the three, whom he referred to as "a diabolic threesome" and a "clan" were destroying France's image and urged Chirac to make a decision.

"What I notice ... is the scandalous use of the secret service, a sort of French Watergate," Strauss-Kahn said. "The country has broken down and it's totally unacceptable."

The slow-burning scandal began with anonymous charges in 2004 that Sarkozy and other politicians held accounts in a Luxembourg-based finance house, Clearstream, and linked them to a bribe-ridden sale of French frigates to Taiwan in 1991.

The list quickly proved bogus. A judicial inquiry has since focussed on finding out who authored it and if top government officials delayed clearing the accused left- and right-wing politicians' names as a way of discrediting them.

The political uproar has increased since Le monde newspaper quoted a senior intelligence official who is investigating the scandal as saying Villepin had told him that President Jacques Chirac wanted the confidential probe to focus on Sarkozy.

Villepin was already weakened politically by his defeat earlier this month over a youth jobs law, while last year three weeks of rioting by disaffected youths in poor suburbs hit the country.

The dispute over the list, which included Strauss-Kahn's name, has further poisoned the sour relations between rival conservatives Villepin, a close ally of Chirac and seen by some as his successor, and Sarkozy who is at odds with the President.

"I want to know who has been manipulating this, what is behind it and why," Strauss-Kahn said.

The case has shaken France. A number of politicians have urged Chirac to act, by distancing himself from Villepin or by calling for early elections. Villepin is expected to comment on the situation on Tuesday after Monday's national holiday.

Watergate refers to a political scandal in the 1970s that led to the resignation of US President Richard Nixon.

- REUTERS