BRITAIN: The Conservatives directly challenged the probity and honesty of the British Prime Minister, Mr Blair, yesterday as the political agenda was dominated by further allegations of sleaze and cover-up over the Mittal affair.
As 60 per cent of voters in a Sunday Times poll said Labour projected the impression of a "sleazy and disreputable" party compared with 41 per cent for the Tories, the Prime Minister's spokesman dismissed as "hysteria overload" the latest reports about the government's support of Labour donor Mr Lakshmi Mittal.
Downing Street insisted ministers were not consulted about a £70 million favourable rate loan from the European Bank of Reconstruction and Development (EBRD) - which included £6 million from the British taxpayer - to Mr Mittal to help the Indian billionaire purchase Romania's Sidex steelworks last year.
The Mittal row erupted again after a report in the Sunday Telegraph said officials at the Department for International Development instructed Britain's representative to the EBRD to vote in favour of the loan to Mr Mittal's company, LNM Holdings, last October.
The loan was approved despite the opposition of the US representative to the EBRD and the Sidex deal went through last November.
The revelations came after last week's disclosure that Mr Blair wrote to the Romanian Prime Minister in support of the Sidex sale to Mr Mittal, whose company employs fewer than 100 people in Britain.
Calling for an inquiry into the deal, the Conservative leader, Mr Iain Duncan Smith, said he was "amazed" by the latest revelations. "British taxpayers have now apparently subsidised this man, as well as letters from the Prime Minister's office going to support his purchase of a Romanian steel company," he said.
"My concern is that what the Prime Minister and what the Government seem to be doing now is leaving us with huge doubts about their probity, huge doubts about their honesty," he told ITV's the World this Weekend programme.
But as the Conservatives raised doubts about the government's honesty, Mr Blair's official spokesman said the International Development Secretary, Ms Clare Short, was "livid" that the integrity of officials in her department was being questioned.
Defending the loan and dismissing allegations of sleaze as an "unprecedented attack" by the Tory press, Cabinet Office minister Lord Macdonald said Britain had wanted to support the modernisation process in Romania.
"Our ambassador there said it was a company that should be backed.
" That company had a presence in Britain and it was run by somebody who was on the voters' roll in Britain," Lord Macdonald told Sky News.
However, unease about the support Mr Blair gave Mr Mittal following the businessman's £125,000 donation to Labour was spreading to the backbenches yesterday.
A former Home Office minister, Ms Kate Hoey, admitted there was "real danger" that the Mittal affair and the resignation of media adviser Ms Jo Moore were causing cumulative damage to the government.
"None of us can like what we're reading today about this, and of course there will be some arguments why it's happened, but I think there is a feeling that there is something not right about this," she told GMTV.