France: prime minister defends himself against new allegations in political scandal

The rival, presidential hopeful Interior Minister Nicolas Sarkozy, appeared emboldened by the scandal, insisting he would not back down from his drive to determine who tried to sully his name with bogus corruption charges.

The latest salvos against Villepin were fed by alleged extracts from testimony of a French intelligence chief published in Le Monde on Wednesday. The excerpts implicate Villepin as well as his mentor, President Jacques Chirac who, it is widely thought, would have liked to see Villepin assume the presidency in next year's elections.

Chirac's aides on Wednesday reiterated their denial that the president played a role in the affair, which involves secret accounts in Luxembourg bank Clearstream allegedly used for kickbacks from the French sale of frigates to Taiwan in 1991.

The key question: whether Villepin ordered an investigation into Sarkozy's role in the deal. Villepin admits asking intelligence official Gen. Philippe Rondot in 2004 to investigate the case, but denies naming Sarkozy.

Later probes found Sarkozy had no Clearstream accounts and was not involved.

Le Monde earlier published alleged notes by Rondot indicating that Villepin had named Sarkozy. According to the excerpts released Wednesday, Rondot had warned Villepin - foreign minister at the time - of the risks of such an investigation, but "no one had the political courage to say stop."

The affair has dealt a new blow to Villepin, who was trying to find his feet after two other crises in the past six months - riots in poor suburbs last year and recent student protests that forced Villepin to withdraw a youth jobs law he had passionately defended.

Villepin chastised Hollande for relying on rumors and reacting "to a soap opera conducted by the press."

Speaking at the National Assembly later Wednesday, he insisted that the affair "is it is not a political problem for me. It's first of all a question of public morality. That is why I will not compromise."

Rondot met March 28 with an investigating judge trying to determine who was behind what appears to have been a smear campaign targeting Sarkozy. According to Le Monde, he said that in a January 2004 meeting, Villepin ordered him to investigate some Clearstream accounts _ and that the orders had come from Chirac, thq AP reports.

Investigators are trying to determine who was behind the list of alleged Clearstream account holders, which includes leading industry executives and secret service officials. They have conducted searches of Defense Ministry offices and intelligence agency offices.

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