Kickback scandal threatens Belgium

BELGIUM'S reputation as the Italy of the North is taking on sinister overtones.

Daily revelations in a scandal that implicates senior cabinet ministers are undermining both the political class of the French-speaking Socialist Party and the economy. Citizens and investors fear an investigation could lead to an Italian- style unravelling of the Belgian political system.

The scandal dates from 1988 when the government put out a tender on a 12bn Belgian franc (pounds 231m) contract to supply 46 attack and reconnaissance helicopters to the Belgian army. Against army advice, the contract was given to the Italian company Agusta, beating stiff competition from France and Germany. The Agusta bid won even though its hourly running costs were nearly 70 per cent higher than its French competitor.

Agusta's offer came with a sweetener of spare-parts factories in Belgium, but these never materalised, and it is now alleged that what clinched the deal for Agusta was a promised backhander for the Socialist Party (which controlled the defence ministry) - a claim those involved deny strenuously.

The heartland of the Socialist Party is French-speaking Wallonia and the city of Liege, jokingly known as the Palermo of Belgium. The reference is not to organised crime but to the politicisation of public and private life.

In July 1991, Andre Cools, a Liege Socialist leader, drove his mistress to the station where he was assassinated by a lone gunman. The week before his death Cools had promised 'interesting revelations'.

Veronique Ancia, the judge investing allegations of bribery and corruption in the Agusta affair is examining the possibility that Mr Cools, angered at being excluded from the alleged Agusta kickbacks, intended to reveal murky dealings, but was murdered first. Judge Ancia wants to interrogate three leading politicians implicated in the case. This week, MPs lifted parliamentary immunity from Guy Spitaels, minister-president of Wallonia and a former Socialist Party leader, and Guy Mathot, Wallonia's Interior Minister. The Chamber of Representatives is to decide if the deputy Prime Minister, Guy Coeme, defence minister in 1988, has a case to answer. The hearing is on Friday.

The inquiry has been blown apart by the leaking of Judge Ancia's report. It suggests that the technical evaluations of the three helicopter bids were 'adjusted' by Mr Coeme or members of his cabinet to strengthen Agusta's bid. Mr Coeme denies this. But Judge Ancia had interviews with the former Socialist deputy prime minister, Philippe Moureaux, who denounced his former collegues, alleging that Mr Spitaels agreed Agusta should get the contract, aided and abetted by Mr Mathot. A former mistress of Mr Mathot's said some illegal payments were spent on a villa on the French Riviera. Mr Mathot says the house was bought with his own money. Detractors say the power struggle between the idealist Cools and the more pragmatic Mr Spitaels and Mr Mathot was well known. The government has contained the scandal but the revelations are probably only the tip of the iceberg.