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By Catherine Bremer | July 1, 2011 7:35 AM EDT

News that the sex assault case against Dominique Strauss-Kahn could collapse hit France like a thunderbolt on Friday, raising prospects of a return to French politics, though probably not to the 2012 presidential race.

Socialists, who saw Strauss-Kahn as their best chance of winning power after years in opposition until his arrest in May, rejoiced at news that prosecutors in New York now doubt the credibility of the hotel maid who alleged he tried to rape her.

The dramatic twist revived anger among his French supporters over the way the former IMF chief was paraded handcuffed and unshaven by U.S. justice authorities, and locked up in the notorious Rikers Island prison, before he had had a chance to defend himself.

But others in France said that even if his name were cleared, too much damage may have been done to Strauss-Kahn's reputation for him to be electable, although he could return gradually to politics and take a lesser post in government.

Two sources close to the case said the credibility of the hotel maid, a 32-year-old immigrant from the West African state of Guinea, was now in question. The New York Times said the prosecution case was on the verge of collapse.

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"This is wonderful for Dominique (and) for his family. It's like the end of a nightmare. In any case, I have always been convinced he was not guilty," said Jean-Marie Le Guen, a Socialist deputy and close ally of Strauss-Kahn's.

"I think he will be a key player in politics in the months ahead, that people will expect him to contribute and that he will have a considerable weight."

Strauss-Kahn, under house arrest in New York, will go back to court on Friday, with prosecutors now discussing whether to drop the serious felony charges against him.

They may still seek to make him plead guilty to a lesser misdemeanor, with questions remaining over whether any sexual encounter was consensual or forced.

"Many things still count against him, including the calendar. It will take weeks or months to perfect his defense," Christophe Barbier, a political commentator and editor of L'Express weekly, told LCI television.

"Even if what he did was not criminal, all this is going to take time. There is everything we have learned about him, the damage to his reputation. All this makes the idea he could be a candidate very hypothetical, it's science fiction."

MUCK-RAKING DEBATE

Strauss-Kahn's arrest in May sent shockwaves through France, instantly dashing the former finance minister's chances of challenging President Nicolas Sarkozy in the April election.

The affair set off a muck-raking debate over his private life and the French media's practice of hushing up sexual misconduct by politicians.

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