Kenneth Clarke, the Chancellor of the Exchequer, yesterday ruled out internationally co-ordinated intervention as a means of stabilising the world's currency markets.
The markets stayed quiet yesterday as European finance ministers met in Brussels to discuss the recent foreign exchange turbulence. The pound and dollar strengthened a shade against the mark.
"Concerted intervention does no good, " Mr Clarke said after the ministers' meeting. "It is no good drawing up a grand plan and trying to determine what intervention might produce. It is not feasible in today's market circumstances."
The Chancellor urged fellow ministers to weather the storm by maintaining tight fiscal and monetary policies.
Mr Clarke also hit out at "colleagues" in the Conservative Party who he accused of undermining the strength of the pound by whipping up fears about Britain's commitment to Europe.
Scotching new rumour of tax cuts, he made clear that he had no intention of weakening his drive to keep down the deficit and maintain low inflation. "I have no intention of taking macro-economic decisions that would threaten that," he said.
Debate about intervention gathered pace at the weekend when Jacques Santer, president of the European Commission, called for concerted action by the Group of Seven wealthiest industrial nations amid fears that further turmoil in the foreign exchange markets might put new strains on the European exchange rate mechanism.
Mr Santer suggested the G7 should consider convening a "Plaza Two" meeting, a reference to international co-operation in the 1980s known as the Plaza accord, in which concerted action was taken to smooth the descent of the dollar.
His proposal appears to have met with little support from other European finance ministers. Mr Clarke said the idea of a Plaza Two would be totally inapproriate. "Intervention can only succeed if it is going with the grain of the markets. It is no good trying to achieve things by international intervention which runs in the face of market sentiment."
The Chancellor denied that he had had a "dust-up" with Mr Santer over the issue, saying there had simply been a good discussion. "He took one point of view and I took another."
Edmond Alphandery, the French economy minister, insisted yesterday that instability showed that "as soon as we can get to a single currency the better". Mr Clarke would not be drawn into this argument.Reuse content