Kenneth Baker, the former party chairman and Home Secretary, called for interest rates to be cut to 6 per cent, declaring that the Chancellor 'should make a start by reducing them today. He hasn't got to wait for the French referendum because our interest rates are not going to be determined by bankers in Frankfurt or voters in France'.
The Government now had 'a wonderful opportunity to expand the economy,' he said on BBC Radio's Today programme. 'We are likely to have the fastest rate of growth of any Western economy because we're in charge of our interest rates again.'
The Prime Minister's signal that any return by Britain to the European exchange rate mechanism was likely to be longer term also helped calm the party's anti-Maastricht MPs who had been warning of trouble on 'an unprecedented scale' if John Major tried to take Britain back in soon.
Sir Teddy Taylor, secretary of the Conservative European Reform Group had declared it was 'arrogant and bumptious of the Government within hours of the most costly humiliation that Britain has ever suffered, to say they were going to jump back into the ERM strait-jacket as soon as they possibly can'.
The group has written to Mr Major asking for a debate and vote before any decision to return is made. But it remains adamant that Britain should not go back.
Sir Rhodes Boyson, the Brent North MP and executive member of the 1922 Backbench Committee, said Britain needed the exchange rate mechanism 'like a hole in the head', while Bill Cash, the MP for Stafford, said 'we should not go back in', adding that the ERM had proved 'a failed policy geared to the needs of the Germans'. However, Hugh Dykes, the pro-Maastricht MP for Harrow East, said ERM membership was 'essential for this country's future prosperity'.
Some senior Tories who supported entry to the exchange rate mechanism now doubt, however, that Britain can return while Germany has an independent central bank which looks after purely German domestic interests, ignoring the needs of its neighbours. Simply waiting until German interest rates allowed a return would not prevent a similar crisis developing in future, one argued.
However, the growing euphoria among some Conservative MPs who believe Britain can now go for rapid growth outside Europe has alarmed other backbenchers.
George Walden, the former minister and diplomat, warned that the combination of devaluation and the pound floating free had not worked before.
'There is no doubt that the opponents of the ERM have been proved right on the riskiness of going in at the rate we did,' he said on BBC radio. 'But that does not mean to say they are right about the alternative policy. My fear is that there will now be a mood that will encourage a belief that there is a romantic free market future out there alone in the middle of the Atlantic somewhere.'
Backbenchers were supportive of Mr Lamont's strictures against Germany. Neville Trotter, MP for Tynemouth, dubbed Chancellor Helmut Kohl, the German leader, 'churlish' for his response.
'It is a simple fact that the failure of the Germans to handle their own economic problems has caused serious problems for the rest of Europe,' he said.
Others such as David Howell, chairman of the Commons Select Committee on Foreign Affairs, argued that comments made in the heat of the moment should not sour future relations. He said the need was to look to the future. The chances for the existing plans for economic and monetary union appeared non-existent. But there was a case for 'restoring an exchange rate network that is more robust and does not succumb to the pressures we have seen in recent days'.Reuse content