The French franc continued to fall yesterday as the main candidates in the country's presidential elections intensified their row about the ``strong franc'' policy of Edouard Balladur's government and the independence of the Bank of France.
By the close of European trading in Paris, the franc had lost 6 centimes against the mark and was coming dangerously close to its permitted threshold in the European Exchange Rate Mechanism.
Yesterday Mr Balladur launched a torrent of rhetoric against Jacques Chirac, his rival on the right, accusing him of "lacking credibility", "irresponsibility" and "demagogy".
Mr Balladur's spokesman, Nicolas Sarkozy, also budget minister in his government, said directly that Mr Chirac had "caused the franc to lose value" with his "proposals and polemic with the Bank of France at a deeply inopportune time".
He accused Mr Chirac of "taking a risk with the savings of French people" - an emotive charge that reflects the high political stakes being played for. Voting in the first round of the election takes place on Sunday.
Mr Balladur was trailing in third place in the last published opinion polls, at the weekend, and his campaign was starting to have the scent of defeat. His chance to fight back came when markets reopened on Tuesday. He immediately responded to remarks by Mr Chirac, made at the end of last week, about what he regarded as the undue influence of the governor of the Bank of France on government economic policy.
Mr Chirac had said that, if elected, he might want to reconsider the relationship between the bank and the politicians, making clear he did not think the bank had any business talking about government policy on matters such as public service pay. His remarks were widely seen as indicating a possible curtailment of the bank's independence and a possible weakening of the "strong franc" policy if he became president.
They appeared to tie in with what is seen in some - especially Balladurist - quarters as a commitment in Mr Chirac's election programme to reduce unemployment, if necessary by sanctioning a hefty increase in public spending.
Mr Chirac denies his programme will involve much increased spending and, since the damage of his remarks about the Bank of France became clear, he and his team have taken every available opportunity to reject the gloss placed on them.
Yesterday, both Mr Chirac and his spokesman, Franois Baroin, insisted he had no intention of rescinding the independence of the bank - which he had helped to initiate - and that his support for the policy of the "strong franc" is "not ambiguous".
At his regular weekly press conference, Mr Baroin said "the franc is not and should never be the subject of electoral campaigning". Current turbulence in the markets, he said, had nothing to do with the election, but resulted from the international economic situation, and especially the fall of the dollar.
The Socialists also weighed in, yesterday. First, Lionel Jospin said that he had no intention of quarrelling with the governor of the Bank of France.
Then Jacques Delors, former president of the European Commission, added his authority to the Socialist position, saying the whole debate was "misplaced" and an example of "monetary populism".
He added that Mr Balladur's stated intention of meeting the 1997 deadline for European Monetary Union might cost France 1 per cent in growth - a price too high to pay. A more realistic time for France to join the EMU would be January 1999.
Currency turmoil, page 32