IMF chief Christine Lagarde key witness in Tapie case

A French court has decided not to place the head of the International Monetary Fund, Christine Lagarde, under investigation over a payout made when she was finance minister.

Ms Lagarde was instead made an assisted witness in the case, meaning she will be called upon to testify but is not directly under suspicion.

Some 400m euros (£342m; $516m) was paid to disgraced tycoon Bernard Tapie in 2007.

Ms Lagarde has denied any wrongdoing.

"My status as assisted witness is not a surprise to me, since I always acted in the interests of the state and in conformity with the law," Ms Lagarde said after a second day of questioning that lasted some 12 hours.

The status of assisted witness is far less damaging for Ms Lagarde than if she had been placed under formal investigation, which could have put her under pressure to resign, the BBC's David Chazan reports from Paris.

He says there will be relief in France, where there were fears the country's image would be tarnished.

The Court of Justice of the Republic, which investigates ministerial misconduct, is looking into claims that Mr Tapie, a controversial business figure, may have received favourable treatment because of his support for the former president Nicolas Sarkozy.

'Best solution'

Ms Lagarde decided to use arbitration to settle a long-running legal battle between the state and Mr Tapie. The tycoon received a much bigger payout than he might have been awarded by a court.

The IMF chief insists the award was the best solution at the time. She is not accused of profiting from the payout, but she is being questioned over the alleged misuse of public funds.

The case stretches back to 1993 when Mr Tapie sold his stake in sports company Adidas to Credit Lyonnais. Soon afterwards, the bank sold on the stake for a much bigger profit.

Mr Tapie claimed the partially state-owned bank had defrauded him by deliberately undervaluing Adidas at the time of the sale, and the arbitration panel found in his favour.

Ms Lagarde's predecessor as head of the IMF, Dominique Strauss-Kahn, was forced to resign in 2011 after a New York hotel maid accused him of sexual assault. Charges were later dropped.

The BBC's correspondent in Paris, Christian Fraser, says that after that scandal, few in France want to see another prominent French politician embarrassed on the world stage.