Chirac backs PM Villepin, no reshuffle

PARIS, May 6 (Reuters) French President Jacques Chirac gave his full backing to Dominique de Villepin today amid calls for the prime minister to resign over a suspected plot to smear political rivals, including Interior Minister Nicolas Sarkozy.

''There is no question of a reshuffle,'' a source close to the presidency told Reuters.

''For the president, things are clear: he has full and complete confidence in Dominque de Villepin and his government.'' Le Monde newspaper today said Chirac had held talks with Sarkozy yesterday, possibly raising the prospect of him replacing Villepin.

The source said the talks were merely the usual weekly meeting between the head of state and interior minister.

Villepin, his authority shattered by last month's defeat over a youth jobs measure, has been forced to issue almost daily denials that he misled parliament and the nation over a probe he ordered two years ago into suspected high-placed corruption.

He has categorically denied ordering an investigation into Sarkozy, his party rival to contest 2007 presidential elections, and other politicians alleged to have had secret bank accounts linked to kickback scandal.

French media is awash with speculation that Villepin wanted to use the scandal to sink Sarkozy's ambition to run for president, a charge Villepin has vehemently denied.

Sarkozy has lodged a formal complaint and demanded judges find out who was behind the smear campaign.

Sarkozy held talks with Villepin for more than an hour on Saturday and may be interviewed as a witness by one of the judges investigating the plot on Thursday.

The Clearstream affair dubbed the ''French Watergate'' by the opposition began with anonymous charges in 2004 that politicians held accounts in the Luxembourg-based finance house linked to bribe-ridden 1991 sale of French frigates to Taiwan.

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 top politicians.

The scandal has mushroomed since, threatening Villepin's future and crippling his ability to push on with reforms.

It has also overshadowed good news on the economy and fanned support for the far-right, which could prove decisive in next year's elections.

REUTERS SY KP1928