If the French needed more proof that their political system was in urgent need of repair, a new scandal is providing it. The so-called Clearstream affair has sucked in President Jacques Chirac, Prime Minister Dominique de Villepin, Interior Minister Nicolas Sarkozy, and a cast of others, including businessmen, spooks, and high-profile magistrates.

The scandal, named after a Luxembourg-based international clearing and settlement house, is turning into a byzantine beast, even by exacting Gallic standards for convolution. However, its political implications are easy to summarize, because they illustrate the rivalry within France's main right-wing party between Chirac and de Villepin on the one side, and the ambitious Sarkozy on the other. The question that has yet to be answered is whether the president and prime minister sought to use accusations of corruption against the interior minister--accusations that later proved to be false--to demolish his bid to become the right's candidate in the April 2007 presidential election--whether in favor of Chirac if he chooses to stand for a third term, or of de Villepin, as the president's most probable anointed successor.

Much remains unclear, but in May and June 2004, French magistrate Renaud Van Ruymbeke received anonymous letters and a CD-Rom disclosing the names of individuals who had allegedly been paid kickbacks through Clearstream from the sale of French frigates to Taiwan. Subsequently, the source was shown to be Jean-Louis Gergorin, a senior official at the European defense firm EADS. While it's not certain whether Sarkozy's name was on the initial copy of the CD-Rom (Gergorin has stated it was not), Chirac and de Villepin may have initiated an investigation of him (even that's not proven yet) presumably to get dirt on their foe, who by then was preparing to take over leadership of the Union pour un Mouvement Populaire (UMP), the former Gaullist parliamentary majority party to whom all three men belong. Particularly embarrassing is that de Villepin may have ordered the inquiry to continue, and perhaps expanded it, even after being told by a senior intelligence officer that Sarkozy was innocent.

The affair was given new life last January, when Sarkozy went to court to gain access to the case files. But this caused controversy as well, because the intelligence officer who declared Sarkozy blameless claims he tipped the minister off long before January about what was going on. This implied that Sarkozy, far from being a victim, used his legal request for information as a means of weakening Chirac and de Villepin.

In the past two weeks, Sarkozy showed once more that he could sniff the public's mood. As details of the scandal emerged, he made it known that he would not resign from the government, even if many observers, and reportedly several of his advisors, wondered how he could coexist with a prime minister who had purportedly tried to destroy him. Sarkozy made it appear that his decision was motivated by a sense of duty, but he really grasped that the public was so disgusted with and bewildered by Clearstream, that his making a fuss might threaten his own political career, alongside de Villepin's and Chirac's. The prime minister survived a no-confidence motion in the National Assembly (though many UMP deputies stayed away, in a strong rebuttal of de Villepin), but he's very likely terminally damaged as a serious presidential contender for the right.

It was the third misstep by de Villepin in seven months, following on from rioting by immigrants in France's suburbs last October, and the fiasco early this year after the prime minister's vain effort to implement the so-called Contrat de Premiere Embauche (CPE), or the First Hire Contract. The rioting underscored how elusive was the problem of Muslim immigration to France, and how paltry were the ideas from mainstream political parties for advancing integration. The CPE, in turn, was a ham-fisted, flawed, but also understandable stab at trying to introduce flexibility into the rigid French labor market. It was a modest endeavor (so much so that the body representing French employers refused to endorse it) that would have permitted employers to terminate the employment of workers under the age of 26, without any reason, or notice, within their first two years of being hired.

De Villepin's first mistake was to sneakily approve the CPE by tagging it on to other legislation, without clearing the way through a national dialogue necessary for so predictably contentious a measure. His second was to misread how deeply young people viewed it as a lethal threat to job security in a country where the state is considered a giant safety net. Facing weeks of massive demonstrations, the prime minister's steadfastness was ultimately undermined by an anxious Chirac, who proposed changes to the CPE that effectively neutralized its effectiveness.

With a political class eyed suspiciously by the public (even if Sarkozy and his main Socialist rival Segolene Royal have better managed to remain above the fray), no answers to the pressing problem of immigration, and governments unable to break free from stifling state regulation of an increasingly outdated economy, France looks poorly prepared to face a future that necessarily requires more social and economic suppleness. For a long time it kept alive the illusion of renewal thanks to the ongoing project of European unity, which was to culminate in the approval by European Union member states of a single constitution. But French voters put that effort to the sword last year, when a de facto alliance of right-wing voters wary of eroding national sovereignty and left-wing voters who found the European constitution too economically liberal sank the draft document.

Now France is listless. Charles de Gaulle and his successors, particularly Francois Mitterrand and Chirac, understood that only an anchor in Europe could salvage a declining France. Only in the context of a unified continent would the country be able to punch above its weight. But the EU's rapid expansion, growing fears that the European leviathan would be unable to successfully manage immigration, visceral distrust of social and economic change, and much else, coalesced to give the French cold feet. In such confusing times, the country has tended to simply change its constitution. For France to untie its myriad knots, the solution may require replacing the Fifth Republic with a Sixth.