Prosecutors appeal former French PM smear ruling

PARIS (Reuters) - French prosecutors will appeal against a judgement clearing former prime minister Dominique de Villepin of involvement in a plot to smear his rival Nicolas Sarkozy.

The move, announced on Friday by Paris state prosecutor Jean-Claude Marin, paves the way for a second round of the

so-called "Clearstream trial," in which Villepin was accused of trying to sabotage Sarkozy's bid to win the presidency in 2007.

Villepin condemned the appeal and accused the president of pursuing a vendetta against him.

"This decision is a political decision and what it shows is that Nicolas Sarkozy, president of the Republic, prefers to continue in his relentlessness and hatred instead of assuming the responsibilities of his office," Villepin told BFM television.

The appeal is expected to be heard at the end of 2010 or the beginning of 2011, Marin said.

Villepin was accused of being part of a plot using forged documents to link Sarkozy to a corruption probe when the two men served in government together and both were angling to succeed the ageing centre-right president, Jacques Chirac.

Had he been found guilty, he risked an 18-month suspended prison sentence and a fine of up to 45,000 euros ($63,180).

But after months of investigation and weeks of hearings last year, the court ruled on Thursday that there was no proof of Villepin's bad faith or involvement in a conspiracy, designating two fellow defendants as the architects of the affair.

"The court did not draw all the conclusions from all the elements contained in the investigation and heard during the trial and part of the truth has yet to emerge," the state prosecutor's office said in a statement.

2012 CAMPAIGN

The decision by the prosecutor, who acts independently of the government, opens the prospect of an unpredictable and potentially damaging court battle for the centre-right as preparations for the 2012 election campaign get under way.

Villepin, who has a large Internet supporters' club, indicated after the verdict on Thursday that he envisaged a return to the political scene.

But he did not say whether he intended to campaign for the presidency, as some in his inner circle have been urging.

He said he hoped to offer "an alternative to policies that are not producing results" but his voter appeal is untested as he has never been elected to office.

French newspapers saw Thursday's court decision as a clear triumph for Villepin, with several carrying unsourced reports describing Sarkozy's furious reaction to the judgement.

"Clearstream: Villepin wins the match against Sarkozy," the daily Le Parisien headlined its main story on the trial.

Within Sarkozy's ruling UMP party, where Villepin still has numerous supporters, the leadership tried to play down the battle between the two men, urging unity in the ranks.

But some of Villepin's allies said the appeal could spark open conflict in the party, which is already divided over several key policy issues.

(Editing by Mark Trevelyan)