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
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

Ashdown Group: Marketing Executive - 6 month FTC - Central London

£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...

Ashdown Group: Junior Project Manager (website, web application) - Agile

£215 per day: Ashdown Group: Junior Project Manager (website, web application ...

Guru Careers: Software Engineer / Software Developer

£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before