DOMINIQUE STRAUSS-KAHN ON CLEARSTREAM, HIS

C O N F I D E N T I A L SECTION 01 OF 04 PARIS 003360

SIPDIS

SIPDIS

E.O. 12958: DECL: 01/01/2016
TAGS: PGOV PREL ECON FR PINR EUN
SUBJECT: DOMINIQUE STRAUSS-KAHN ON CLEARSTREAM, HIS
PRESIDENTIAL ASPIRATIONS, AND FRANCE: A COMPREHENSIVE
SNAPSHOT OF THE POLITICAL SCENE

REF: A. PARIS 3178


B. PARIS POINTS OF 5/16

Classified By: AMB Craig Stapleton for reasons 1.4 (B & D).


1. (C) Summary: In a remarkably wide-ranging tour de force
equally remarkable for its candor, former finance minister
and leading Socialist party presidential candidate Dominique
Strauss-Kahn shared with Ambassador Stapleton May 16 his
views that: the Clearstream scandal is far from over; the
Socialist Party can win in the 2007 presidential elections
and that there will not be a repeat of 2002; his most
difficult hurdle in his quest for the presidency will be to
win his party's nomination over Segolene Royal; tackling
significant reform in France is all the more difficult for
being necessary; France's main problem is its current lack of
confidence in itself; and the Chirac presidency looks
increasingly to be marked by failure. End summary.

Clearstream and the Censure Motion
--------------

2. (C) In a May 16 meeting with the Ambassador, Former
finance minister, Socialist Party (PS) heavyweight and
presidential contender Dominique Strauss-Kahn (known here as
DSK) insisted on the seriousness of the censure motion vote
tabled earlier by the PS, to be voted on later the same
afternoon, in connection with the Clearstream scandal (see
also ref A). While the outcome was a foregone conclusion,
and such motions generally were little more than political
"theater" given the institutional realities of the Fifth
Republic, he asserted that it was nonetheless important.
This was especially so given the decision by some leading
center-right UMP governing party deputies (ref B) not to be
present for the vote and center-right UDF party president
Francois Bayrou's decision to vote for the censure motion.


3. (C) Although DSK dismissed Bayrou's decision as political
posturing to maximize his own first-round presidential
election chances (DSK judged that Bayrou would receive only
6-9 percent of the first-round vote),he judged that an
alliance with the left -- even if Bayrou switched to
supporting the right in the second round -- could potentially
have significant ramifications for a left-right face-off in
the second round of the 2007 presidential elections. He
hedged about the impact in the end, however, noting that most
UDF voters were probably more to the right than their leaders.

2007 Between Center-Left and Center-Right
--------------

4. (C) DSK was confident that the second round would be a
contest between the UMP and the PS, notwithstanding the
current popularity of extremist elements on the left and the
right. But voters had learned from the 2002 elections, where
their protest votes cost Jospin the elections. He predicted
that the PS candidate would garner around 22-23 percent, with
likely UMP candidate Sarkozy getting closer to 24-25 percent
of the first-round vote. Chirac's initial 2002 score of less
than 20 percent was, DSK asserted, an historical anomaly.
DSK was adamant that far-right National Front leader
Jean-Marie Le Pen would come in third. Even if he managed to
exceed his initial score of 2002, it would still not be
enough.

Villepin Will Survive, Good for Left
--------------

5. (C) DSK acknowledged when asked that it would probably be
better for the PS if Villepin stayed in office until the end
of Chirac's term, given that the prospects were for "one year
of nothing." Even if Chirac did decide to jettison Villepin,
it is not clear whom Chirac should name as a successor. DSK
concluded that, if the current government managed to survive
until the beginning of the World Cup in late June, then it
would sail through the July/August holiday period. When
September rolled around, the electorate would be more focused
on the 2007 presidential elections than trying to boot the
incumbent government out of office.


6. (C) Asked if this meant that the Clearstream affair would
therefore soon be forgotten, DSK (in contrast to some)
responded that "this was only the beginning." He was struck
by secret investigator General Rondot's decision not to meet
with the investigating judges, commenting that "this meant
there was someone more he feared than the judges" (by
implication, with something to hide). Explaining, he added
that Rondot was a military guy who was obeying orders.
Someone had told him to stonewall, which is why he had gone
silent. Turning to a putative meeting on Clearstream between
Chirac and Sarkozy, he said Chirac had asked Sarkozy what the
risks were of Clearstream continuing, and Sarkozy had
responded "100 percent." DSK concluded that, although the
scandal might disappear from the public eye, the

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investigations would continue. He lamented that France was
not a more mature democracy like the U.S. DSK said that
Sarkozy had rightly understood that voters felt touched by
the scandal and were demanding justice, even if they could
not understand it fully. His dilemma was that, if he stayed
in the government, this would only bewilder voters and
reinforce their alienation. Chirac, DSK continued, could
have put an end to the story by changing prime ministers.

Government Dead in Water
--------------

7. (C) Turning to Villepin, DSK recalled his last press
conference during which he had touted small improvements in
the unemployment situation. But this did not fool anyone, he
asserted. DSK explained that it was difficult to flaunt a
tiny improvement in one area when, at the same time, the
overall economic situation was not good and deteriorating,
and social tensions were on the uptick. Moreover, the
controversy over the First Employment Contract, a measure of
little significance per se, had now made further reform
almost impossible.

Admiration for Sarkozy
--------------

8. (C) DSK agreed that the PS had benefited from the
Clearstream scandal, although he acknowledged that every
party or figure had skeletons in the closet. He nonetheless
complained that Sarkozy had overdone it in portraying himself
as a victim and that this would reap little sympathy on the
left. DSK characterized Sarkozy's overall strategy simply as
one of being determined to win, but readily admitted that he
was an extremely talented politician who had managed
successfully to turn voters' concerns about growing crime,
for example, to his own benefit. DSK expressed astonishment
that Sarkozy was running on a platform of claiming that he
"knew the solutions to France's problems, but would not
reveal or implement them until elected." This was a
permissible strategy for the opposition party, he complained,
but was hard to sustain for someone already in power.

Chirac Prefers Left to Sarkozy
--------------

9. (C) DSK also judged that Sarkozy had positioned himself
so far to the right that he would have difficulty moving back
to the center. He claimed there was a large number of Chirac
supporters who would not vote for Sarkozy as president. DSK
vigorously affirmed that Chirac was "an objective ally" who
would prefer a victory of the left to having Sarkozy succeed
him for a number of reasons: he did not deem Sarkozy a
"worthy" successor (just as Mitterrand had favored Chirac
over Jospin); he was a "radical-socialist" (in the French
sense) at heart in any case, in contrast to Sarkozy, the free
market "liberal." Chirac also feared Sarkozy was more likely
than the left to pursue him in the courts for past scandals
in which he was implicated. (Note: The French Radical party
fits loosely into the Christian democratic tradition of
capitalism with a strong social component.)

Royal Leading for Now, But...
--------------

10. (C) Asked about the presidential nomination process in
the PS, DSK referred to Segolene Royal's commanding lead in
public opinion polls as a "collective hallucination" and
reminded the Ambassador that, in France, those who were poll
leaders six months before the elections -- Giscard d'Estaing
in 1981, Balladur in 1995, and Jospin in 2002 were the most
recent examples -- had invariably lost. DSK predicted that
Royal would eventually crumble and that, if nominated by the
PS, would not survive against Sarkozy. He noted wryly in
that Sarkozy had already reached the same conclusion, which
explained why he continued to extol her qualities as a
potential candidate. DSK added that while she had a decent
chance of winning the "internal" debate within the PS, she
would have much more difficulty winning the "external" debate
with Sarkozy, even with good advisors and handlers.

Not of Presidential Timber
--------------

11. (C) Within the PS, according to DSK, Royal was not as
popular, as she drew much of her public support from the
right and center. He claimed that 80 percent of the party
was not behind her, and dismissed announcements of support
from various mayors as falling far short of a snowball
effect. DSK asserted that activists in the party "sensed,"
for example, that Royal could not imagine herself in the
international arena, for example, negotiating gas agreements
with Putin; good advisors would not be able to make up for
her rather shallow experience. He noted that she had not
become the President of the Poitou-Charentes region by
defeating former prime minister Raffarin, as has been
claimed; she had simply won the seat that he had vacated.

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She had never won a tough election battle, he contended, and
there were no assurances that she would be able to do so. He
described her several times as "fragile but not in the
feminine sense," not up to a real debate on the issues. The
problem, he admitted readily, was that she was currently
popular and that even her most banal pronouncements -- such
as being a "Blairite" in the positive sense when it was he,
DSK, who had carried this label for years -- were greeted as
major media events.

DSK's Strategy for Winning
--------------

12. (C) Asked to outline his own strategy for winning the
presidency, DSK said that the party was currently divided in
thirds between supporters of Royal, of him, and of former
prime minister Laurent Fabius. His hope was that a debate --
the holding of which he admitted would be difficult to
arrange -- among candidates within the party would produce a
choice based on substance and that candidate's potential for
defeating Sarkozy. He did not believe Royal could win on
either count. New PS members had joined on the basis of
being able to participate in the outcome, and this could not
occur without a debate; if Royal tried to prevent a debate,
then she would be perceived as hiding something. DSK
summarized his strategy as getting past the highest hurdle
first: the key for him would be to come in at least second in
the initial first round of the party's selection (not at all
a sure thing),and then win in the second round. (Note: The
clear implication was that if DSK and Royal survive the first
round, the supporters of Fabius would shift their support to
DSK in the second round.) Similarly, in the presidential
elections, if DSK made it to the second round (which he
believed would be possible for whoever was the PS candidate),
then he would be the best positioned to defeat Sarkozy in the
final round.

Jospin Out; Hollande's Mistakes
--------------

13. (C) DSK did not believe that former prime minister
Jospin would be the party's nominee, as he could not seek the
nomination directly and the party was unlikely to offer it to
him on a platter absent some serious crisis. DSK believed
that he would benefit most from Jospin supporters, given
Jospin's opposition to Royal and Fabius. DSK was critical of
First Secretary Hollande, saying that he had yielded to the
temptation of being a presidential candidate himself, when
more even-handed treatment of other candidates would have
assured him a place as prime minister in any new government
and kept alive his presidential aspirations for the future.
Hollande was described as a good tactician but poor
strategist, who would be left out in the cold if Royal won,
given his status as her domestic partner. DSK claimed that
Hollande had initially proposed Royal's candidacy as a way to
preserve his own chances, but that the sorcerer's apprentice
had taken on a life of her own. This attempted
"privatisation" of the party's agenda had damaged Hollande's
reputation.

Domestic Situation Key
--------------

14. (C) Looking to the 2007 presidential elections, DSK
criticized Villepin for putting students in the streets over
a triviality (the CPE, or First Employment Contract) rather
than something important and more worthy of a fight. The
main issue, DSK said, is economic growth, not this or that
reform of the labor code. France needed to focus on basic
reforms, such as of its universities, not on whether a youth
under 26 could be fired without a proper explanation. Given
the overall sense of insecurity in France, particularly among
parents who feared that their children would have worse lives
than they, DSK thought foreign policy would play only a very
modest role in the elections, notwithstanding the public's
interest in Iran and terrorism.


15. (C) Nor did DSK believe that Europe would be a major
election issue, since France was currently too obsessed with
its own situation to look more broadly even toward Europe.
DSK said the 2007 presidential elections would evolve around
the same set of issues, with the left and right platforms
being mirror images of each other. Sarkozy would emphasize
immigration and security, and the left would emphasize
employment and integration. He predicted that if Sarkozy
succeeded in getting voters to focus on security, then he
would win, whereas the left would need to emphasize the
economy. He said the left had lost in 2002 because it had
allowed the right to set the agenda.

Whoever Wins Will Have it Tough
--------------

16. (C) DSK said that whoever won the 2007 elections would
have little room for maneuver in effecting change. Things

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would not be as easy as in 1997, when it was possible to
stimulate the economy out of recession. The left would need
to take risks if elected, and work harder to reform the
system. It would be critical to act quickly, based on the
mandate of an election. For the mid-term, DSK cited the
importance of more investment in growth sectors. Over the
shorter term, it was important for French companies to regain
confidence in France. He blamed Chirac for creating anxiety
in business and cynicism among the elites. Part of Royal's
current success was that she had tapped into the country's
need to have pride in itself. DSK suggested that little
would remain of Chirac's European legacy besides a failed
referendum and a proposal to reduce the value-added tax for
French restaurants. France, he said, needed someone who
could show the way forward. Sarkozy could do that, he said,
but Royal would be unable to do so. There was not enough
"beef" there.

One Last Bold Step from Chirac?
--------------

17. (C) DSK concluded with the thought that it was not too
late for Chirac to show true leadership. He could quit now,
call for a renewal of France, call for early elections, and
announce his resignation for a date that would permit both
sides to prepare properly for them. In this way he could
serve France and save his reputation. DSK stopped there,
obviously concluding, but not saying, that Chirac would never
do it.

Comment
--------------

18. (C) DSK was lively and engaging, full of good humor, and
remarkably modest and without pretensions. That may prove to
be his undoing. While he was openly critical of Royal, he
also readily admitted that she was doing many things right.
And while he clearly viewed himself as the right man to lead
France, he seemed reluctant to beat his own drum and was
spare with prescriptions about what he would do if chosen to
be France's next president. The impression left was that,
while he may be the most capable and qualified candidate
among the Socialists, he lacks the fire in the belly that
would propel him to victory. He is one of those who would
clearly be better governing than campaigning -- and therefore
may never get the chance to govern.


Please visit Paris' Classified Website at:
http://www.state.sgov.gov/p/eur/paris/index.c fm

Stapleton