| BUSINESSWEEK ONLINE : NOVEMBER 15, 1999 ISSUE | ||||||||
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| INTERNATIONAL BUSINESS
High Anxiety in Paris As the corruption probe gathers speed, officials wonder who's safe Even the French were amazed. Instead of battling to defend his privilege and position as many have before him, French Finance Minister Dominique Strauss-Kahn resigned on Nov. 2 amidst preliminary allegations of wrongdoing, insisting it was the proper thing to do. His swift departure marks a symbolic shift in the behavior of France's ruling elite, who have long cultivated the art of squelching judicial investigations and fighting to retain power at all costs. ''French society is evolving profoundly,'' says Jean de Maillard, a judge and president of the Tribunal de Grande Instance in Blois. Strauss-Kahn may still clear his name. On Oct. 14, a former senior official of MNEF, a student insurance fund whose former managers are under investigation, claimed Strauss-Kahn backdated letters regarding fees for $97,000 in work for the fund. This led investigators to suspect the work was never performed. Laboratory tests ordered by investigating magistrates have confirmed that documents were altered, according to reports. Strauss-Kahn claims he received the money for work performed in counseling MNEF on the sale of assets to Compagnie Generale des Eaux--now named Vivendi. If the investigation clears Strauss-Kahn of wrongdoing, he is likely to resume his position as finance and economics superminister. In the meantime, his resignation is a serious blow to the government of Socialist Prime Minister Lionel Jospin. But the reverberations of Strauss-Kahn's resignation go well beyond the Matignon. Indeed, the real cataclysm in French political circles may be yet to come. Justice officials, investigative journalists, and political observers believe the anticorruption movement has gathered such momentum now that no one is safe any longer. At the same time, the entire political-party system based on rigid ideologies and illegal financing schemes has begun to fragment and disintegrate. That combination of factors could become explosive, with ramifications as profound as Italy's ''Clean Hands'' campaign in the early 1990s. ''What's going on in France is a delayed parallel to what happened in Italy in 1992 and 1993,'' says Jonathan Story, professor of political economics at Fontainbleau-based Insead. Much will depend on the results of a series of investigations into leading figures, ranging from Constitutional Court President Roland Dumas to close associates of President Jacques Chirac himself. For now, however, Jospin must deal with the immediate political impact of Strauss-Kahn's departure. The Finance Minister had provided a critical counterweight to leftist ideologues in Jospin's coalition government, which includes hard-core Socialists, Communists, and Greens. Strauss-Kahn worked behind the scenes to pull the hard-left factions of the coalition toward the center on key issues such as privatization. Strauss-Kahn also fought to temper left-inspired policies, including the 35-hour workweek and taxes on stock options. In the government, ''he was a symbol of modernism,'' says Eric Chaney, senior economist at Morgan Stanley Dean Witter in London. ''Even if it is a temporary leave, the hard left has been reinforced.'' Strauss-Kahn's replacement, Christian Sautter, former budget minister, is expected to hue closely to Strauss-Kahn's moderate course. But insiders say without the pull of his predecessor, Sautter will have difficulty holding the middle ground. While European economic union will prevent France from lurching too radically to the left, ''the liberal counterweight is gone from the French government,'' says Thomas Mayer, economist at Goldman, Sachs & Co. in Frankfurt, adding that the French economy could now look like the stagnant German one. DISGUSTED VOTERS. The political tensions inside Jospin's government will be heightening just as the magistrates' push gains a momentum of its own. The attack on corruption began in 1990. But public opinion has increasingly rallied around prosecutors. Voters have grown disgusted by revelations of corruption in financing political parties and abuse of power by the country's elite. Now, France's top politicians find themselves under increasing pressure. Chirac is the target of a civil lawsuit charging alleged misuse of funds at the Paris City Hall when he was mayor from 1977 to 1995. Former Prime Minister Alain Juppe has been named in an official probe of the same period, while current Paris mayor, Jean Tiberi, is under investigation for alleged influence peddling (table). ''You just need one protagonist who reveals a bit too much and all the secrecy breaks down. Suddenly everyone is airing their dirty linen in public,'' says Story. The French Establishment isn't exactly caving in, however. Many magistrates say the ruling elite is seeking new and more sophisticated ways of protecting themselves by changing laws. Although investigating magistrates are no longer threatened or dismissed outright, as in the early 1990s, for pursuing high-level officials, new legislation could curb their room to maneuver. Justice Minister Elisabeth Guigou has taken some actions to grant them more independence. But she has also given the Justice Ministry the ability to intervene. ''Prosecutors will be less free under the new system. What [the government] gives with one hand [it] takes away with the other,'' warns Valery Turcey, president of the magistrate's union in Paris. Indeed, on Nov. 2, the Justice Ministry suddenly transferred the head of financial-crime investigation at the Paris prosecutors office, Marie-Jose Fulgeras, to a new posting, against her will. The move was interpreted by some as a clear attack on the independence of magistrates. Co-workers say Fulgeras had a reputation for independence, which had put her in conflict with the Paris prosecutor's office. ''It's absolutely scandalous,'' fumes Thierry Jean-Pierre, a former magistrate who launched France's anticorruption drive with an inquiry into the financing of the Socialist Party. ROUTINE TRANSFER? The Justice Ministry insists that Fulgeras is being transferred as part of a normal rotation. ''They took advantage of the situation to fire her,'' insists Jean-Pierre. Like many investigative judges, Jean-Pierre was threatened anonymously and blocked by government officials during the course of his investigations in the early 1990s. Despite such efforts, few expect the increasingly influential magistrates to be deterred from their efforts in investigating politicians. ''The clash between the two will be permanent, but politicians are more and more vulnerable,'' says de Maillard. What's next in the anticorruption campaign? Strauss-Kahn is the fifth Cabinet minister to step down as a result of probes since the early 1990s. In the wake of his resignation, some are starting to call for Tiberi to quit as Paris mayor. Meanwhile, politicians and ordinary folk alike are anxiously awaiting the results of probes targeting dozens of political and business figures. Few doubt that France will see more upheaval in coming months. By Gail Edmondson, with Carol Matlack, in Paris, and with Jack Ewing in Frankfurt _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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