French Central Bank head Mr Jean-Claude Trichet, who is accused of having overlooked misleading accounting reports as a former treasury director, goes on trial today in a case that could derail his appointment as the next president of the European Central Bank (ECB).

Also on trial in the affair, which stems from the near-bankruptcy of the formerly state-owned Crédit Lyonnais bank in the early 1990s, will be another former Bank of France governor, Mr Jacques de Larosiere.

Mr Larosiere (73), is a titan in world finance, having served as managing director of the International Monetary Fund and president of the European Bank for Reconstruction and Development.

The trial - expected to last six weeks - will be closely monitored in European financial circles, since its outcome could disrupt a delicate compromise worked out to ensure a non-controversial transition at the four-year-old ECB.

The ECB, which sets monetary policy for the 12-nation euro zone, is the second most influential central bank after the US Federal Reserve.

Mr Trichet (60), had been promised the top job at the institution in May 1998 according to a verbal agreement among European heads of state and government. He, in principle, is to replace 67-year-old Mr Wim Duisenberg of The Netherlands, who has agreed to step down on July 9th, 2003 - three years ahead of schedule - to make way for a French ECB head.

But the accord could unravel if Mr Trichet is not acquitted or if the trial is postponed - which could occur if any of his eight co-defendants in the case so requests - to a date closer to July 9th.

At present there are no other obvious French candidates to replace Mr Trichet.

Late last month, Mr Duisenberg sought to ease concerns about the future of the bank, pledging to stay on as president if there were no clear successor by early July.

"In my letter of resignation, I wrote that I would like to be dismissed from my post on July 9th, 2003 or at such a later date as would be in the interest of the orderly transition of management at the central bank," he said.

Mr Trichet was placed under judicial investigation in April 2000 on suspicion of "spreading false information on the market and presenting and publishing inexact accounts" in the rescue of Crédit Lyonnais.

The allegations date from 1991, 1992 and the first six months of 1993 when he was treasury director at the French finance ministry and therefore responsible for state-owned enterprises such as Crédit Lyonnais.

He is suspected of having too readily accepted financial information that tended to minimize the deepening problems at the bank.

Crédit Lyonnais had expanded rapidly abroad, becoming the largest bank in Europe only to be brought to the verge of bankruptcy with the end of the property boom in the late 1980s and by misjudged investments. The cost of a state rescue of the bank - which has since been privatized - has been estimated at €7 billion.

Mr Trichet, who has never commented publicly on the accusations against him, has made a name for himself as a tough defender of orthodox economic policies, as well as of the public deficit conditions in the Maastricht treaty that created the euro and of the macroeconomic constraints in the euro zone's Stability and Growth Pact.

The French government continues to back Mr Trichet's bid to lead the ECB and will do so even if the trial is delayed, a government source said early last month.

Mr Larosiere, Mr Trichet's predecessor at the French central bank, also faces misleading reporting charges in the case. As head of the Bank of France, he was in charge of a state commission that oversees national banking operations.

The proceedings will seek to determine if the financial health of Crédit Lyonnais had been deliberately underestimated and, if so, by whom. The trial should further determine if any of the defendants agreed to say nothing about the false reports.

Joining Mr Trichet and Mr Larosiere at trial are two former Crédit Lyonnais managing directors, Mr Bernard Thiolon and Mr Francois Gille, along with former bank president Mr Jean-Yves Haberer.

In addition, three auditors, Mr Albert Pavie, Mr Kevin Pilgrem and Mr Patrick Gounelle, are accused of having certified false information.

• One of the British Cabinet's leading proponents of the euro has warned against "rushing in" to the single currency.

Welsh Secretary Mr Peter Hain, who also has responsibility for European Union reform, said the British Government should be "cautious" about calling a referendum and that the assessment of the five economic tests would be "hard-headed".

The remarks from a traditionally pro-euro minister were being seen as a significant cooling of Government policy towards the single currency. Prime Minister Mr Tony Blair enthusiastically declared at the Labour party conference in October that if the five tests were met then "we go for it".

At the weekend, the Welsh Secretary said that calling a referendum would be "risky", adding: "I am not in favour of rushing in." - (PA)