His government sought to put a brave face on the EC realignment initiated by Britain on Wednesday night. It included a 5 per cent devaluation of the peseta, Spain's first such move in 10 years. Carlos Solchaga, the Economy Minister, went before parliament to defend the devaluation. Other government officials, seeking to deflect public and opposition criticism, sought to paint the move as temporary. If the French back the Maastricht treaty on Sunday, they said, the peseta could quickly return to its earlier rates.
The markets did not agree. The Spanish currency fell below its new parity of 68.42 to the German mark yesterday, seen by dealers as proof that a bigger devaluation was called for. 'The market had been discounting a 10 per cent devaluation,' said Antonio Pelido of the brokers, FG Inversiones Bursatiles. 'There would have been more confidence if the Bank of Spain had put up rates earlier, say to 18 per cent, as a temporary measure.'
Juan San Roman of Salomon Brothers in London said a 7 per cent devaluation would have been closer to the mark. 'The currency markets don't believe the peseta can sustain its new levels,' he said, even if the French vote 'yes' on Sunday.
Mr Gonzalez, before leaving Berlin, was careful not to rule out a further devaluation. 'We can't exclude the possibility of that happening. But I think it's much better to wait and watch how the market develops,' he said.
Portugal, whose escudo has also been under pressure recently, warned yesterday that it, too, may have to devalue. 'If the 5 per cent difference with the peseta is maintained, the escudo may have to devalue,' said Jose Braz, the Portuguese Treasury Secretary. He suggested the peseta devaluation may be only a temporary phenomenon. 'The (ERM) mechanism is as strong and stable as it has always been,' he said without a trace of a smile.
Spain has kept interest rates among the highest in Europe - you can get 13 per cent on a savings account - as it fights a runaway budget deficit. The devaluation is bad news for Mr Gonzalez's attempts to keep down inflation, now running at an annual 5.7 per cent, but it appears to have been his only face-saving way out of Wednesday's turmoil.
Paranoid about Spain's old, backward image, Mr Gonzalez has been anxious to bring his country into the European fold as an equal. To drop out of any fundamental European structure, such as the ERM, was always going to be anathema to him and government officials continued to defend the ERM yesterday. It emerged yesterday that Spain had not only refused to suspend the peseta from the ERM along with sterling and the lira, but strongly opposed the British and Italian move.
'The withdrawal, hopefully temporary, of the lira and sterling could have focused all the market's speculative tension on the peseta, which made a reduction in the (peseta) central exchange rate advisable,' said Mr Solchaga.
For Mr Gonzalez, the stakes are high. Approaching 10 years in power, he will have to call a general election within the next 12 months. Convergencia, or convergence with the rest of Europe, has been his government's byword as he pushed through recent painful tax increases.