Trichet trial enters key phase

The trial of Bank of France governor Mr Jean-Claude Trichet on false accounting charges enters a key phase this week as state prosecutors prepare to make their closing statements, with Mr Trichet's job as next president of the European Central Bank (ECB) hanging in the balance.

Mr Trichet, who stands accused of overlooking falsified financial reports concerning Crédit Lyonnais in the early 1990s as the then state-owned bank plunged towards near-collapse, last week denied he had done anything wrong.

He told the Paris court that while his office had been worried about the bank's "audacious strategy", it "never had the feeling that there could have been a lack of sincerity or disloyalty in the establishing of the accounts". The French central bank chief is on trial with eight others, including former bank president Mr Jean-Yves Haberer and former Bank of France governor Mr Jacques de Larosiere. Prosecutors are expected to make their closing statements tomorrow, which will be much-awaited in financial circles, as the outcome of the trial could upset a delicate compromise reached to ensure a smooth transition at the ECB.

In May 1998, Mr Trichet had been promised the top job at the ECB, according to a verbal agreement among European heads of state and government.

The financial institution, which sets monetary policy for the 12-nation euro zone, is the second most influential central bank after the US Federal Reserve.

In principle, Mr Trichet is to replace Mr Wim Duisenberg of The Netherlands, who has agreed to step down on July 9th - three years ahead of schedule - to make way for a French ECB head, but the deal could unravel if Mr Trichet is convicted.

The allegations against Mr Trichet date from 1991, 1992 and the first half of 1993, when he was treasury director at the French finance ministry and therefore responsible for state-owned enterprises such as Crédit Lyonnais.

Mr Trichet (60) was placed under investigation in April 2000 on suspicion of "spreading false information on the market and presenting and publishing inexact accounts" that tended to minimize deepening problems at the bank. -