Chirac's domestic set-up has franc in a flat spin

The franc came under pressure on international markets again yesterday after a reawakening of questions about the private housing arrangements of President Chirac.

The franc's jitteriness coincided with reports that the government still had 15bn francs (pounds 2.01bn) of savings to find to meet its 1996 budget targets. But politics as much as economics were thought to have prompted yesterday's problems, highlighting the continued fragility of the five-month-old Gaullist administration.

The immediate cause was an exclusive report in the left of centre daily, Liberation, that the national public prosecutor had been asked to rule on circumstances in which Mr Chirac and his wife renewed the lease on their Paris flat in 1990. The nature of the alleged offence would be similar to that which recently threatened the Prime Minister, Alain Juppe.

Mr Chirac, it is alleged, effectively awarded himself a low-rent Paris flat when, as mayor, he was responsible for housing in the capital. Current legislation makes it an offence for elected officers to obtain housing or any other council service from their own council.

The Chiracs' housing arrangements came under scrutiny briefly during the presidential election campaign when it was revealed that the flat they occupied in rue du Bac, a fashionable street in the Latin Quarter, was actually leased at a low rent from a housing association in which the city council had a one-third interest. A smaller flat, which they owned, was let to tenants at a higher, market, rent.

It transpired that the Chiracs had lived in the spacious flat for nearly 20 years. But there had been a brief scare in 1989, when the owner died and the freehold was put up for sale - which could have entailed renegotiation of the Chirac lease.

After the freehold failed to find a buyer at the original price, it was eventually bought by a housing association which was partly funded by the city council and functioned under its aegis. Mr Chirac claims to have had nothing to do with the purchase, but the fact is that his lease was renewed, at a monthly rent of 11,000 francs (pounds 1,425) - less than half of what a similar mansion flat would fetch on the open market.

A lawsuit was initiated by Evelyn Ferreira, an ecology activist and Paris ratepayer, for the legality of the Chiracs' lease to be considered. This suit lay dormant with the Paris judiciary until last week when, as Liberation revealed, a formal request was delivered direct to the national prosecutor, Bruno Cotte, asking him to consider if there were grounds for investigating Mr Chirac. This was the same question which he had answered positively in the Juppe case, supplying Ms Ferreira with her precedent.

In Mr Juppe's case, a legal compromise - widely criticised as two-tier justice - was formulated which required him to leave the contested flat before December or face an investigation that would force his resignation as prime minister. Mr Juppe moved out on Saturday.

With Mr Chirac, the position is simpler because he holds office for seven years and could hardly be forced out for such an offence. But it is also more complicated because it would severely test the constitutional relationship between the presidency and the judiciary. Probably, the case will never get that far. The strength of public opinion, and that of officials who face the loss of their subsidised flats after the Juppe affair, could encourage the Chiracs to call the removal vans sooner rather than later.