Trial could thwart Trichet’s bid to be ECB chief

BANK OF FRANCE Governor Jean-Claude Trichet went on trial yesterday in a decade-old banking scandal that could thwart his bid to become the next president of the European Central Bank.

Mr Trichet, 60, faces prosecution with eight other bankers and finance experts for an alleged cover-up of losses during a state bailout of French bank Credit Lyonnais in the early 1990s. The trial is being closely watched internationally because Mr Trichet is due to take over from retiring European Central Bank President Wim Duisenberg this year.

A conviction could ignite a renewed tussle within Europe over who should take over the ECB, cause unease in financial markets and raise doubts about the stability of the institution that steers the world’s second-biggest economy.

However, the trial could still be postponed to give more time to prosecutors to examine new evidence contained in an accountancy report released in October.

Mr Trichet has consistently denied the charges. He hopes to be cleared before Mr Duisenberg steps down in July. The trial in Paris is expected to last about six weeks.

Mr Trichet was head of France’s Treasury at the time of a massive €31 billion government rescue of Credit Lyonnais in the early 1990s.

The central bank chief was placed under investigation in 2000 for allegedly diffusing false information to markets and publishing inexact bank accounting records for 1992 and the first three months of 1993.

At the time, Credit Lyonnais racked up huge debts by overborrowing to finance rapid expansion and lending money to many failed businesses. Only huge government cash injections kept it alive.

The bank was privatised in 1999 and the government sold its final stake in the company to rival BNP Paribas in November.

Mr Trichet’s lawyers argue he didn’t have the necessary information or clout to influence what the bank reported in its financial results.

Mr Trichet is a highly-respected banker who helped draft the European Union’s Maastricht Treaty that set the foundations for the successful launch of Europe’s single currency a year ago.

Also on trial is Jean-Yves Haberer, the former chief executive of Credit Lyonnais and Mr Trichet’s predecessor as Bank of France governor, Jacques de Larosiere.