A SHARP drop in the value of the pound yesterday appeared to justify Tony Blair's claim that the controversial weekend deal on who will head the powerful new Euro-bank has not undermined market confidence in the single currency.
The Prime Minister was forced on to the defensive in the Commons by allegations that he had presided over a ''fudge'' in Brussels on Sunday that saw France extract a promise that the near unanimous choice for the post would stand down four years early in favour of a Frenchman.
Despite warnings of market panic and predictions that dealers would seek refuge in currencies outside the 11 signed up for European monetary union, the pound fell for the second day running, closing at DM2.9440, down 1.61 pfennigs.
To hoots of derision from Tory MPs, Mr Blair told the Commons the decision to appoint Dutchman Wim Duisenberg on the understanding that he will only serve half of the fixed eight-year term before standing down in favour of Banque de France head Jean-Claude Trichet was ''right for Europe and right for Britain''.
Tory leader William Hague accused Mr Blair of colluding ''in the launch of a fudged and flawed single currency that could jeopardise people's jobs and investment throughout Europe''.
Moments later, he undermined his own position by appearing to agree when Mr Blair asked him if he would have vetoed Mr Duisenberg's candidacy, a move that would have plunged the preparations for Emu into turmoil.
Saturday's landmark summit in Brussels descended into farce after the French announced they would not compromise in their determination to get a Frenchman into the top post of the European Central Bank, which will set interest rates in the new euro-zone.
More than 11 hours of intense negotiations led by Mr Blair helped to avoid a complete collapse that would have undermined confidence in the single currency. The final communique, confirmed yesterday, gives President Jacques Chirac a written guarantee that Mr Duisenberg's successor will be French.
Mr Blair insisted all the issues had been resolved after ''very difficult'' negotiations, saying: ''The fundamentals are right, a good (European Central Bank) Board will be in place and the euro will be strong, not weak.''
The French moved yesterday to repair the damage done by their approach to the negotiations, which drew accusations of political bully-boy tactics. Senior diplomatic sources claimed the final outcome was ''balanced''.
Observers are convinced the French President deliberately played such a hard game to reassure his sceptical electorate that when the euros are physically in people's pockets in 2002, a Frenchman will be at the helm of the bank issuing and running the new currency.
Rates set to rise Page 19
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