Strain placed on alliance as franc comes under pressure

THE BUNDESBANK's decision not to lower its key discount interest rate deals a heavy blow to the Paris-Bonn axis which, for France, has rested mainly in recent months on German support for the franc.

With the franc under renewed pressure, the current crisis adds grist to the mill of opponents of dependence on what one French banker calls 'monetary purists' in Frankfurt.

Most of the dissent is concentrated within the dominant Gaullist RPR party behind the leadership of Philippe Seguin, the National Assembly president and the main campaigner against ratification of the Maastricht treaty last year.

The argument of Mr Seguin and others has been the classic one that allowing the franc to float would stimulate exports and boost the economy.

Most French industrialists have rejected this argument, giving their support to a strong franc policy to which the last Socialist government held dear and to which Edouard Balladur, the Gaullist Prime Minister, has been faithful since he took office in March.

As France has grown steadily more distant from Germany in the diplomatic field, particularly over the former Yugoslavia, backing for the franc has become the main pillar of the two countries' alliance. If this is seen to have failed the consequences are likely to be far-reaching bilaterally, within the European Community and within the government majority.

Jacques Chirac, the RPR president and leading candidate to succeed President Francois Mitterrand in 1995, is reported to have withheld his public support for Mr Balladur's policy of keeping the franc tied to the mark last week for three days, an indication that he was reluctant to be identified with a policy that was already doomed.

The economic background to the speculation against the franc has come from worse-than-expected statistics since the beginning of this year as the Gaullist-led government took over from the previous Socialist administration. This has made a defence of the franc similar to the battle that raged last autumn more difficult to justify.

Recession has been late in coming to France. Now that it has, analysts expect it to be the worst since the Second World War in depth and duration, while an outlook published by the state statistical institute has dampened hopes of early recovery.

Valery Giscard d'Estaing, leader of the UDF, a partner in France's centre-right government coalition, said the Bundesbank's Lombard rate cut was welcome and should calm markets but would not enable France to cut its own rates further for the moment.

A former president, Mr Giscard d'Estaing said he and Mr Balladur had agreed everything must be done to preserve the European Monetary System and keep the franc in it.

Start your day with The Independent, sign up for daily news emails
News
The cartoon depicts the UK (far left) walking around a Syrian child refugee
newsIn an exclusive artwork for The Independent, Ali Ferzat attacks Britain's lack of 'humanity'
Life and Style
Man taking selfie in front of car
health
Sport
footballManager attacks Sky Sports pundit Jamie Redknapp after criticism of Diego Costa's apparent stamping
Life and Style
food + drink
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Web Developer - PHP

£16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Guru Careers: In-House / Internal Recruiter

£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

Day In a Page

Greece elections: In times like these, the EU has far more dangerous adversaries than Syriza

Greece elections

In times like these, the EU has far more dangerous adversaries than Syriza, says Patrick Cockburn
Holocaust Memorial Day: Nazi victims remembered as spectre of prejudice reappears

Holocaust Memorial Day

Nazi victims remembered as spectre of prejudice reappears over Europe
Fortitude and the Arctic attraction: Our fascination with the last great wilderness

Magnetic north

The Arctic has always exerted a pull, from Greek myth to new thriller Fortitude. Gerard Gilbert considers what's behind our fascination with the last great wilderness
Homeless Veterans appeal: Homeless in Wales can find inspiration from Daniel’s story

Homeless Veterans appeal

Homeless in Wales can find inspiration from Daniel’s story
Front National family feud? Marine Le Pen and her relatives clash over French far-right party's response to Paris terror attacks

Front National family feud?

Marine Le Pen and her relatives clash over French far-right party's response to Paris terror attacks
Pot of gold: tasting the world’s most expensive tea

Pot of gold

Tasting the world’s most expensive tea
10 best wildlife-watching experiences: From hen harriers to porpoises

From hen harriers to porpoises: 10 best wildlife-watching experiences

While many of Britain's birds have flown south for the winter, it's still a great time to get outside for a spot of twitching
Nick Easter: 'I don’t want just to hold tackle bags, I want to be out there'

'I don’t want just to hold tackle bags, I want to be out there'

Nick Easter targeting World Cup place after England recall
DSK, Dodo the Pimp, and the Carlton Hotel

The inside track on France's trial of the year

Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
As provocative now as they ever were

Sarah Kane season

Why her plays are as provocative now as when they were written
Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

Murder of Japanese hostage has grim echoes of another killing

Japanese mood was against what was seen as irresponsible trips to a vicious war zone
Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore