At issue is whether UBS offered potential French clients
investments that prosecutors allege were designed to evade
taxes.

Prosecutors had already questioned UBS France’s chief
executive Jean-Frederic de Leusse and placed the French unit
under investigation. The action against the Swiss parent company
is the latest sign of a widening of the French investigation
into UBS that is part of a global crackdown on tax evasion
following the financial crisis.

The resignation of former French budget minister Jerome
Cahuzac over allegations he had an undeclared Swiss bank account
has heightened political concern over the issue.

Cahuzac admitted to holding a Swiss bank account in March.
He did not specify which bank, but French media reports have
said investigators have a voice recording in which Cahuzac says
he regrets having an account at UBS.

The bank was also given the status of “supervised witness”
on two other allegations related to money laundering and tax
evasion rather than being placed under investigation, the
prosecutor’s office said.

Under French law, being placed under official investigation
means there exists “serious or consistent evidence” pointing to
probable implication of a suspect in a crime. It is one step
closer to a trial, but a number of such investigations have been
dropped without trial.

“Supervised witness” is a lesser status meaning that a
person must be accompanied by his or her lawyer if questioned
further in the investigation.

UBS TO COOPERATE

UBS noted in a statement that the tax evasion inquiry was
“not a new issue”, and added:

“It has been reported on since early 2012. The decision of
the court extends the investigation. We will continue working
with the authorities in France within the applicable legal
framework to arrive at a resolution to this matter.”

The bank also said talks between the European Union and
Switzerland were needed “to find a solution for the past”.

Switzerland has agreed to let its banks hand over internal
information to U.S. authorities in the hope of avoiding
threatened criminal charges over allegations that they helped
wealthy tax cheats, although Swiss lawmakers have at least
temporarily halted a bill to do that.

In Europe, finance ministers recently gave the go-ahead to
start broader talks with Switzerland and other countries about
surrendering bank data on an automatic basis. This could presage
a broader effort to settle its longstanding tax evasion conflict
with the European Union.

(Writing by Christian Plumb; Editing by Mark Heinrich)

The freeze will still lead to the loss of 34,000 jobs in the
defence ministry at a time of growing unemployment in France,
according to a strategic review announced on Monday.

The decision also means the Socialist government will need
to look elsewhere to raise funds as it tries to reduce state
spending by 60 billion euros over its five-year term and meet
deficit targets.

“France wants to maintain its ability to react alone. This
recent period has proved that there is a definite lack in the
army in terms of equipment,” President Francois Hollande said.

Hollande had come under pressure from his own left-wing
lawmakers and armed forces officials who feared that any cuts
ordered by the finance ministry would harm France’s military
capabilty.

The military won plaudits for its intervention in Mali in
January which drove back Islamist rebels. But the operation
showed its limitations in mid-air refuelling, troop
transportation and intelligence gathering.

The review, which outlines defence priorities from 2014 to
2019, comes at a sensitive time for France, a permanent member
of the U.N. Security Council and a nuclear power.

The document seeks to overhaul the armed forces to create a
more mobile army and to boost intelligence resources and special
forces. It also makes cyber security a priority.

Hollande ordered the review to take recent revolutions in
the Arab world into account as well as changes to France’s
historical ties in Africa, and a shift in the United States’
focus away from Europe towards Asia.

The defence ministry has borne the brunt of cuts in recent
years, seeing its annual budget decline from about 2.5 percent
of economic output since the end of the Cold War.

The White Paper set an overall budget for the period of
179.2 billion euros ($233.4 billion). It kept 2014 spending at
31.4 billion euros, equivalent to 1.5 percent of GDP.

It also factored in job cuts from the 228,000 personnel now.

“In total, from 2014 to 2019, the defence ministry will have
to reduce its staff by about 34,000 people,” the document said.

INDUSTRY PROTECTED

Paris will push for a more integrated European Union defence
programme, the review said, and will co-operate with Britain on
a new anti-ship missile.

France’s own defence industry had been braced for spending
cuts that many feared would cause job losses and slash
investment in research and development.

Contractors including Thales and Safran
wrote to Hollande in March warning him of the risk of cutting
back on defence spending when the number of people out of work
is rising.

A list of priorities spares the chief procurement programmes
from being axed.

France will renew its ageing fleet of Boeing refuelling
tankers with a programe to buy converted Airbus A330
passenger jets from 2014. Its targeted refuelling fleet of 12
aircraft is lower than previous estimates of 14 planes.

The White Paper also backs the Airbus A400M military
airlifter, a seven-nation project plagued by cost overruns and
delays. France aims to have a fleet of 50 tactical airlifters.