And a survey of Tory backbenchers by the Independent on Sunday suggests that more than two in three do not want to see Britain back in the ERM despite the Government's commitment to re-enter when 'conditions allow'.
The findings reinforce the growing conviction among senior Tories that Britain will not re-enter the ERM at least until genuine economic recovery is under way. And there is a strong possibility that ministers will use their new-found freedom on economic policy to cut interest rates by half a per cent before the party conference in two weeks time.
The likelihood of ERM re-entry in the longer term could be increased if the French referendum, the result of which will be announced tonight, produces a 'yes' for Maastricht as predicted by two polls published in British newspapers today. A 'no' vote would almost certainly plunge the ERM into new convulsion and even bring it to an end.
Last night, officials of the Group of Seven leading industrial states issued a brief statement after seven hours of talks in Washington acknowledging 'the importance of restoring stable and long-lasting (foreign) exchange rate relationships'.
Speaking after the meeting, the Chancellor, Norman Lamont, laid down three conditions for Britain's return to the ERM. These would include stability in the currency markets, in which German interest rates could fall, and improvements in the operation of the European Monetary System.
While Britain remains outside the ERM, the Chancellor said, fresh reductions in interest rates would be determined not only by the value of the pound, but he hinted at much greater emphasis on growth in the money supply. Because this is very weak at present, his remarks suggest that he could contemplate at least a small cut once market turmoil has come to an end.
Mr Lamont is to chair a meeting of European Community finance ministers in Washington tonight to assess the results of the French referendum.
After last week's turmoil, British ministers are under mounting backbench pressure to cut interest rates sharply before the party conference. But senior ministers are ready to resist cuts that would take rates well below Germany's 9.5 per cent. They fear that such a measure could fuel inflation.
Several would prefer the Chancellor to limit any early cut in interest rates to show the market that the Government is still taking into account German levels and keeping open the option of rejoining the ERM. A half per cent cut now could be followed by a further half per cent reduction later in the year.
One senior member of the Government said: 'We have to dampen expectations.' But our survey of MPs, carried out yesterday and last Friday, suggests that the whips may have an uphill task. Of 74 MPs questioned, 50 said they did not agree that 'Britain should rejoin the ERM'.
Opinion in the country, too, is swinging sharply against Europe, according to the NOP poll, taken last Friday. Now, only 24 per cent would vote for the treaty, while 47 per cent would vote against. The rest are 'don't knows'.
Opposition to the treaty is strongest among Conservative supporters. And 67 per cent of voters believe that a British referendum should be held.
However, support for the Tories has remained remarkably resilient in the wake of last week's crisis. NOP finds Labour only two percentage points ahead of them. NOP recorded a four-point Conservative lead last month - but Labour had leads of up to 10 per cent in other surveys during the past fortnight. Though the Government's reputation for economic competence has been damaged - 59 per cent say that it is 'not very' or 'not at all' competent - Labour fares little better, with 56 per cent saying it is not competent.
Public demands for Norman Lamont's resignation seem to be fading. On Friday, following his public backing from the Prime Minister, NOP found that more people (48 per cent) thought he should carry on than resign (45 per cent). Among Tory backbenchers, too, Mr Lamont receives backing, with 48 saying he should stay and 26 that he should resign. The Prime Minister's position appears unassailable: more than twice as many voters (65 per cent) told NOP he should carry on than resign (30 per cent). Among MPs, 72 said that Mr Major should not resign, with only two 'uncertain'.
In Washington and London, British ministers and officials tried to cool their quarrel with German leaders and bankers. The Chancellor, it was said, had not been trying to call for a cut in German interest rates.
Prospects of such a cut were not riding high. Helmut Schlesinger, the Bundesbank president, said yesterday that the slump of the pound, lira and Spanish peseta had been long overdue, reflecting substantial problems 'in various European economies which have been building up for years'.
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