Maastricht: German banker's plea for peace: Bundesbank meets

SCHWERIN - Helmut Schlesinger, president of the Bundesbank, said yesterday he 'fervently hoped' the war of words with Britain over who was to blame for the devaluation of the pound was over and that 'trusting relations' could be restored.

Speaking after a meeting of the Bundesbank's central council in the east German city of Schwerin, Mr Schlesinger refused to be drawn on whether he personally had authorised the leak this week of a statement defending the bank's position during the sterling crisis, but said: 'I'm no warrior, I'm an absolute pacifist.'

Mr Schlesinger did not want to specify exactly how much the Bundesbank spent trying to prop up sterling before its withdrawal from the European Exchange Rate Mechanism (ERM) just over two weeks ago, but said the bank had spent 92bn marks (pounds 37.2bn) buying up foreign currencies during the whole of last month.

'We fulfilled all our ERM obligations - and more,' said Mr Schlesinger, clearly hurt by suggestions that the Bundesbank had served narrow national interests at the expense of its European partners. Pointing out that Germany had been among the first European countries to enter a linked exchange rate system in 1973, Mr Schlesinger said: 'We have never left this system. We have always been stable and have had a clear view in our relationship to Europe.'

The Bundesbank announced no change in its key Lombard lending rate, which remains at 9.5 per cent. Mr Schlesinger did not want to be drawn on whether a cut could be expected soon.

In its last fortnightly meeting, after the devaluation of the lira on 14 September, the Bundesbank lowered the Lombard rate by 0.25 per cent, but the small reduction was not enough to halt pressure on the pound, which shortly afterwards withdrew from the ERM.

Norman Lamont, the Chancellor of the Exchequer, and several leading British politicians have accused the Bundesbank of not having done enough to support the pound, and have bitterly criticised the manner in which Mr Schlesinger's defence of the bank's actions was given by the German embassy in London to the press this week.

Manfred Kober, the Bundesbank's main spokesman, yesterday reiterated that the statement had been intended as background for the embassy in London and not for the press.