Angry French PM hits out at new scandal allegations

PARIS, May 3 (Reuters) France's Dominique de Villepin angrily defended himself today over his alleged role in a political smear campaign after a newspaper challenged the line of defence the embattled prime minister has used for a week.

Villepin, crippled by a bruising defeat over a youth job law last month, issued the latest of his almost daily denials of guilt as the murky scandal rekindled speculation about his ability to stay in office.

The so-called Clearstream affair has derailed Villepin's efforts to press on with reforms and fuelled a resurgence of the far-right ahead of 2007 presidential elections.

Le Monde today published extracts from a leaked document the daily said proved Villepin knew more than he had acknowledged about an alleged dirty tricks campaign to smear Interior Minister Nicolas Sarkozy, his rival for the presidency.

''The prime minister vigorously denounces the renewed exploitation by the Le Monde newspaper...of truncated comments, confusions and interpretations,'' Villepin's office said in a statement.

''He demands that the truth be established and that lies and calumny end,'' it added. Villepin yesterday called for an end to a campaign of slander against him and ruled out resigning.

The Clearstream scandal began with anonymous charges in 2004 that Sarkozy and other politicians had accounts in a Luxembourg-based finance house linked to kick-backs in the bribe-ridden sale of French frigates to Taiwan in 1991.

The list of accounts quickly proved bogus but the probe continued, leading to complaints by Sarkozy and others that it was an elaborate attempt to discredit leading politicians.

TRANSCRIPT ONLINE Judges investigating the alleged plot have already quizzed a senior intelligence official over the affair and seized notes he made of a January 9 2004 meeting he had with Villepin at which the allegations of financial malpractice were discussed.

Le Monde, which published most of the transcript of the two judges' interview of General Philippe Rondot online, said Villepin's version of events did not stand up to scrutiny.

On Friday, Villepin issued a statement categorically denying he had asked Rondot to investigate Sarkozy or any other politician: ''We never spoke about Nicolas Sarkozy as a possible beneficiary of a foreign bank account,'' his statement said.

Le Monde questioned that assertion.

''Reading the general's note -- which he drew up two years ago not imagining it would one day be seized by the judicial authorities -- makes it clear beyond doubt that Mr Sarkozy was the subject of a large part of the (Rondot-Villepin) interview,'' it wrote in a lengthy article.

''The note, seized during a search, establish that, at that date already, Mr Villepin was informed of the presence of politicians on the Clearstream list.'' Opposition politicians have dubbed the affair a ''French Watergate'', a reference to the bugging scandal that brought down US President Richard Nixon in 1974.

President Jacques Chirac is under renewed pressure to replace Villepin, whose 20 per cent approval rating is just two points above the all-time low, or face the last 12 months in office unable to reform and beset by political woes.

REUTERS KD ND2016