Hollande faces political upheaval over Cahuzac scandal

The French president and prime minister struggled yesterday to shore up the ruins of the “irreproachable republic” promised by François Hollande, following the admission by former budget minister Jérôme Cahuzac that he had indeed opened secret bank accounts in Switzerland and Singapore.

Mr Cahuzac resigned on March 19th, when the Paris prosecutor announced he was under investigation for money laundering and tax fraud. Citing his right to be presumed innocent, the French political class remained circumspect.

Mr Cahuzac confessed and pleaded for forgiveness on Tuesday, after adamantly proclaiming his innocence for four months. His fellow socialists are in shock, while the conservative opposition are attacking the president and prime minister directly.

Le Monde newspaper called the Cahuzac affair "devastating… calamitous… certainly the most terrible blow to the presidency of Hollande since [his election on] May 6, 2012". The scandal is at least as damaging for French socialism as the accusations of attempted rape levelled at former IMF director Dominique Strauss- Kahn.

The president was either naive, incompetent or he covered Mr Cahuzac's lies, Le Monde said. In either case, he committed a grave error and has added a "democratic crisis" to the country's economic and social woes. "The most basic contract of confidence between the people and those who govern is broken," Le Monde concluded.

Betrayal
Mr Hollande went on television after yesterday's cabinet meeting to reiterate his "stupefaction" and "anger" at what he has called Mr Cahuzac's betrayal. "He tricked the highest authorities of the country… and through them all French people," the beleaguered president said. "It is a grave error, an unpardonable error. It is an outrage to the republic." Mr Cahuzac was not protected by the government, Mr Hollande insisted.

Conservative UMP deputy Christian Jacob said it was “difficult to imagine that Hollande and [prime minister Jean-Marc] Ayrault didn’t know what was going on”.

The Cahuzac affair “marks the definitive end of the moralising left”, said UMP leader Jean-Francois Copé.

In his television statement, Mr Hollande announced three decisions, none of which are new: he will strengthen the independence of the justice system, pass legislation to prevent conflict of interest, and ban politicians who are convicted of tax fraud or corruption from re-entering politics.

Right-wing politicians found Mr Hollande’s reaction inadequate. “France is sickened, and I am too,” said former conservative prime minister Jean-Pierre Raffarin. “The words of the president of the republic are not commensurate with the shock we feel… A minister of taxation who escapes taxation!”

In a stormy session at the National Assembly, Mr Ayrault sounded naive when he said that he had "believed in the word of this man and in his signature, for like all the members of the government, he signed a charter of ethics".

Commentators expressed concern that public disgust over Mr Cahuzac’s hypocrisy and the government’s ineptitude will strengthen populist extremists on the right and left. The left-wing firebrand Jean-Luc Mélenchon said Mr Cahuzac had benefited from “caste amnesty” and that “a world of liars, tax cheats and cynics has been revealed. It’s time for the broom!”

Several factors appear to have persuaded Mr Cahuzac to confess to offences he had hitherto denied. Two investigating magistrates appointed last month were closing in on the €600,000 he still has abroad.

'Come clean'
The Swiss newspaper Le Temps reported Mr Cahuzac's lawyers learned that the Geneva prosecutor had identified his Swiss accounts.

And the investigative newspaper Le Canard enchâiné was about to publish a report that Mr Cahuzac's lawyer met the magistrates to organise a meeting where he would "come clean".

Mr Cahuzac had in fact held two Swiss accounts. He switched the first account, at UBS, to the more discreet Reyl & Cie, founded by the half brother of Mr Cahuzac's financial adviser, in 2000.

A decade later, the Reyl account was transferred to the bank’s Singapore branch. Not only did Mr Cahuzac evade tax on close to a million euro deposited in these accounts in the 1990s; the source of the funds, believed to have come from French pharmaceutical companies, is also in question.

Until two weeks ago, Mr Cahuzac was considered a star in Mr Hollande’s administration. If convicted, he risks up to five years in prison and a €375,000 fine.