Paris, Tuesday.
FRANCE and Germany closed ranks today to belittle the impact of the
collapse of the Exchange Rate Mechanism and declare they were still on
course for European Monetary Union.
After regular Franco-German economic talks, both governments went out
of their way to stress the warmth of co-operation and minimise the
setback to European integration from the loosening of links among
European currencies.
French Economy Minister Edmond Alphandery denied reports of feuding
between the European Community's two central partners as a wave of
speculation overwhelmed the exchange-rate grid.
''I want to lay to rest all these rumours about the so-called
deterioration in Franco-German relations . . . I can testify that during
this period of tension on the markets, the Franco-German couple once
again proved its solidity,'' he said.
At a joint news conference, Alphandery and German Finance Minister
Theo Waigel chose the same word -- ''flawless'' -- to describe their
co-operation during the monetary crisis which shook the European
Monetary System.
Alphandery told a news conference France remained committed to a
stable franc and low inflation.
Bundesbank President Helmut Schlesinger also minimised the impact of
the weekend decision to widen to 30% the bands within which EMS
currencies may fluctuate against each other.
Other EMS currencies had been devalued by a mere 1.5% on average
against the mark, and the German unit had gained only 0.7% against
leading world currencies since then, he said.
Talk of currencies having to use the entire 15% margin they had been
given on either side of a pivotal rate had not come true, a jovial
Schlesinger said before apologising in French for having to catch an
early plane home.
The Ministers and central bankers betrayed not the slightest doubt
that a single European currency, the centrepiece of the Maastricht
treaty on European Union, would go ahead as planned by 1999 -- despite
comments by Prime Minister John Major and many economists that it now
appeared totally unrealistic.
Waigel said last week's events showed the criteria for economic
convergence among EC states were still valid and should even be
reinforced.
But others took a less sanguine view of the results of the monetary
crisis. Former French finance minister Michel Sapin said the decision to
loosen the links between EMS currencies was ''quite simply bad for
France and bad for Europe''.
Sapin, who fended off two previous waves of speculation before being
voted out of office in March, said Germany's responsibility for the
monetary crisis was clear. He accused the Bundesbank of unsettling
markets.The French stock market showed its disappointment that the
loosening of links among European currencies had not led France to cut
interest rates immediately, giving up some of the gains it made
yesterday.
The Bundesbank shaved its key money market rate to 6.80% today while
France left short-term rates unchanged, helping the franc to rebound to
3.4800 against the Deutschmark after falling as far as 3.5305 yesterday.
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