Le Figaro is leading on what is being called “Karachigate” here in France, an illegal campaign-funding scandal that came to light following a bombing in Karachi in Pakistan in 2002 in which 11 French nationals were killed.

The paper headlines: “The Elysée condemns political manipulation”. Two of Nicolas Sarkozy’s associates - Nicolas Bazire, the best man at his wedding, and Thierry Gaubert - have been formally accused of handling kickbacks on arms contracts with Pakistan. Investigators are looking into whether sums of money from the kickbacks went into the coffers of the presidential election campaign of a former prime minister Edouard Balladur in the mid 90s. Nicolas Sarkozy has spelt out in a communiqué that he was a Balladur spokesman at the time and not the director of his campaign and had no role in raising campaign funds.

While Le Figaro reports the official line from the Elysée, Le Parisien-Aujourd’hui-en-France describes the press release as “curious”. “Is the presidency losing its nerve”, it asks? The paper argues that the Elysée has been clumsy by saying that Sarkozy’s name does not appear on any of the paperwork related to the scandal when in fact the president does not have access to it.

Le Monde Online is reporting that French judicial officials are now accusing the Elysée of violating the secrecy of the documents. (NB: the paper says “violating” - violé - and not “having stolen” – volé - as stated in error on air.)

Papers are also looking at two women who have emerged centre stage in the scandal. France Soir headlines: “La princesse qui fait trembler Balladur et énerve l’Elysée” (“The princess rocking Balladur and upsetting the Elysée") along with a photo of Hélène de Yougoslavie who is a descendant of the last king of Italy and Thierry Gaubert’s wife. Hélène de Yougoslavie has told investigators her husband accompanied an intermediary, Ziad Takieddine, to Switzerland to pick up cash-stuffed suitcases on several occasions in the period 1994-1995. Papers are showing the princess along with Nicola Johnson, Takieddine’s former wife, who has also spoken to investigators. Le Parisien-Aujourd’hui-en-France paper describes the revelations by the two women as “explosive”.