THE French Government defiantly shrugged off yesterday the accusation that Dominique de Villepin, the Prime Minister, used a senior intelligence officer in a campaign to smear his political rival.

President Chirac resisted calls to dismiss M de Villepin over his handling of an investigation into a campaign against Nicolas Sarkozy, the Interior Minister and arch enemy of both men.

M Chirac’s aides made it known that there was no question of replacing M de Villepin, who has become the focus of the so-called Clearstream affair, a long-running scandal involving an investigation into a list of bogus bank accounts.

The latest revelations have rebounded on M Chirac, further tarnishing an 11-year presidency that has been plagued by scandals and failures and that has become the most unpopular administration in the 48 years of the Fifth Republic.

Opposition politicians and commentators questioned whether M de Villepin could remain in office after his disastrous mishandling of the recent failed labour reform and then a leak on Friday from judges investigating the Clearstream affair.

The Prime Minister, a 53-year-old appointee, denied the allegations of improper behaviour and made clear that he was determined to stay put.

The leak, published by Le Monde, indicated that M de Villepin had instructed a senior intelligence officer in 2004 to follow up claims, which turned out to be bogus, that M Sarkozy held an illegal bank account in Italy, fuelled by bribes from the sale of naval frigates.

M de Villepin, who was Foreign Minister at the time, allegedly told the officer, General Philippe Rondot, that M Chirac wanted M Sarkozy investigated. A memo by the general after the January 2004 meeting that was seized last month by investigators read: “Political stake: N. Sarkozy. Fixation on Sarkozy (re: conflict J. Chirac/N. Sarkozy).”

The latest disclosures in the Clearstream affair prompted a deluge of criticism over the weekend of M Chirac and the protégé whom he appointed Prime Minister last May as part of his policy of hampering M Sarkozy’s campaign to succeed him as President next spring.

Ségolène Royal, the favourite for the Socialist candidacy next year, said yesterday that the affair illustrated the discredit that had stained M Chirac’s waning presidency. She said: “It is the end of a reign without ethics, the explosion of a system that gives room to secret methods, to dirty tricks, to destabilising moves.”

François Bayrou, the leader of the centre-right UDF party, which has a senior member in the Chirac Cabinet, said that the affair showed that France was reaching the end of a presidential system that was in crisis. “There is reciprocal hatred accompanied by dirty tricks between the main leaders of the state and Government,” he said.

M de Villepin and President Chirac denied on Friday that they had singled out M Sarkozy over the affair, the name of which derives from a financial clearing house in Luxembourg. M Sarkozy was one of several prominent figures included on the list of alleged Clearstream account holders that circulated in secret in 2003 and was quickly found to be a fabrication. The Interior Minister has suspected since 2004 that M de Villepin and M Chirac sought to use the false claims to blacken his name in their struggle to prevent him from standing as the centre-right presidential candidate.

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