France embarrassed by Renault spying debacle

PARIS (Reuters) - France faced severe political embarrassment on Friday after carmaker RENAULT (RNO.PA)threw doubt on the spying accusations that shook the company to its core and threatened a diplomatic spat with China.

Renault will "face consequences" after saying it might have been tricked into launching the investigation, which has cost three top executives their jobs, French Finance Minister Christine Lagarde said.

Renault admitted for the first time in an interview in Le Figaro's Friday edition that it had reasons to doubt it had been a victim of industrial espionage.

The carmaker lodged a legal complaint in January over suspicions of spying targeting its high-profile electric vehicle program, amid fears that information had been passed to a foreign power. The three sacked executives deny wrongdoing and are taking legal action against Renault.

"What counts today is getting to the truth and getting there quickly, and if the suspicions were unfounded that justice be done, confidence restored and compensation paid," Lagarde said in an interview on RMC radio.

The minister added that "all the consequences" would have to be faced in terms of responsibility for the affair.

The case has strained relations between Renault -- which is 15 percent state-owned -- and the government, as the carmaker came under fire for not informing authorities of its suspicions soon enough and carrying out its own investigation first.

The affair also threatened to spark a diplomatic spat when news of the sackings broke in January, after a government source said investigators were following up a possible link with China in initial probes before a formal inquiry was launched.

"One shouldn't shoot without a sight or accuse without proof," Lagarde told RMC.

Renault's lawyer, Jean Reinhart, said on Thursday that French intelligence services were still probing the existence of bank accounts in Switzerland and Liechtenstein as part of the inquiry and dismissed reports the carmaker had been tricked.

The existence of the possible accounts is a key part of the case against the three fired executives.

But Renault Chief Operating Officer Patrick Pelata told Le Figaro "a certain number of elements lead us to doubt," adding that the company had arrived at two hypotheses.

"Either we are confronted with a case of espionage and a senior security executive is protecting his source despite everything," he said. "Or Renault is the victim of a manipulation, which we don't know the nature of but which could be a fraud."

Pelata said he would propose reinstating the three executives -- all of whom have said they have done nothing wrong and are suing Renault -- and making good any injustice if "all the doubts are lifted."

"When the inquiry is finished, we will accept all the consequences up to the highest level of the company, that is to say up to myself," Pelata said, adding that in either case the company was a "victim."

(Reporting by Patrick Vignal; Writing by James Regan and Daniel Flynn; Editing by Catherine Bremer Editing by Hans Peters and Andrew Callus)