The US currency added 2.45 pfennigs to DM1.6330 on hopes that the recovery would be sustained. But many fear the respite for the ERM will prove temporary, and a prolonged delay before German rates are lowered or a further cut in British rates may provoke fresh turmoil.
Relief for the ERM coincided with an outbreak of charge and counter-charge over who was responsible for the latest upheaval in the system. Britain's independent monetary policy, in particular, drew criticism from Ireland, Germany and France.
Michel Sapin, the French Finance Minister, said speculators against the franc had allies in Britain with 'wet accomplices' in France.
Speaking as the French currency came under renewed market scrutiny following the punt's devaluation, Mr Sapin said he believed the punt had suffered in part because of 'the immense fall' of sterling. But he added: 'France is not Ireland because it is basic to European construction.'
The minister said the French government would resist attacks on the franc with the same determination it had shown since speculation first became intense a few days before last September's referendum on the Maastricht treaty. The currency was protected by massive Bank of France intervention supported by the Bundesbank.
'We have good economic results and absolute determination,' Mr Sapin said. In an interview with Reuters, he said the Bank of France had not had to intervene yesterday.
Mr Sapin's remarks reflected widespread French irritation with Britain, stemming from its delay in ratifying Maastricht and reinforced by Hoover's decision last week to move jobs from Burgundy to Scotland.
The 'accomplices' in France are politicians, mainly in the conservative opposition, who want the franc de-coupled from the mark and allowed to float.
Meanwhile, Ireland blamed her EC partners for inadequate support, a charge that follows its attack on Britain for reducing base rates, weakening the pound and triggering pressure on the punt.
With the reverberations of Saturday's 10 per cent devaluation of the Irish currency, the largest single devaluation in EC history, still echoing around nervous markets, Jacques Delors, the EC Commission President, called for an extraordinary April meeting of the Group of Seven. 'It is a world economic recession to which we need to find a global solution,' he said.
The EC was, however, yesterday busy apportioning blame nearer home. During a televised meeting of EC foreign ministers, Dick Spring warned that Ireland's experience 'raises obvious questions about the capacity and willingness of the Community to respond effectively to pressures created by volatile exchange rates and the ability of speculators, in such conditions, to attack currencies one by one'.
Without naming names, he re- emphasised Ireland's irritation with France and Germany, denouncing as inadequate 'bilateral arrangements which ignore the essential need for solidarity between all the member states. Unless we act together we could be picked off one by one,' he said.
The Irish Finance Minister, Bertie Ahern, had complained on Sunday that Dublin had sought, but did not get, support from its partners in the ERM.
The fear in Europe yesterday was that unless the ERM is made more flexible, competing national interests will tear it apart and make a mockery of the hard fight for economic convergence.
After weakening slightly in early trade, the French franc and the Danish krone recovered. The franc ended almost unchanged at Fr3.3840 to the mark while the krone recovered from early weakness to end at 3.8565 to the mark.
The Irish punt traded 7 per cent below its former floor in the ERM at DM2.4405, above its new ERM grid mid-point of DM2.41105.
Paying the price, page 21
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