Trading of European currencies today was suspended after France's new conservative government requested a realignment of exchange rates to devalue the French franc and adjust the values of several other monies.
French government officials said negotiations for a general realignment of European currencies will take place this weekend at a meeting of the finance ministers from European Common Market countries at Ootmarsum in the Netherlands. Negotiations will involve the currencies of eight nations -- France, Luxembourg, Belgium, Denmark, Ireland, West Germany, Italy, and the Netherlands -- that are linked by a formal exchange-rate mechanism known as the European Monetary System.
Under the EMS agreement, the currencies of the eight nations are controlled so they fluctuate against each other in a narrow range.
The sudden suspension of trading left many tourists in Italy unable to convert foreign currencies into lire. In Paris, banks generally stopped changing money, but in a pinch they traded small sums.
Trading continued in the Netherlands, but became a matter of "some fantasy, and beyond that, as much wisdom as possible," said Leo Zelders, a spokesman for the Dutch Border Exchange Offices, a moneychangers' organization.
Currency traders said they were expecting a French devaluation against the mark of about 5 percent. The values of the Irish pound, the Belgian franc and the Italian lira also are likely to drop.
The French request for a currency realignment came less than three weeks after a narrow conservative victory in legislative elections here. Conservative opposition parties had called for an early devaluation in order to make French exports more competitive and allow a relaxation of exchange controls.
French commentators noted that currency devaluations are a sensitive political matter because they are widely taken as an admission of economic failure. By devaluing the franc early in the life of the new parliament, the incoming government is hoping to put most of the blame on its predecessor.
The prospective devaluation was criticized by Socialist leaders as politically and technically unjustified. Former prime minister Laurent Fabius said that it was unnecessary because France's inflation rate has fallen to the same level as that of West Germany, its principal competitor, and the country has a balance-of-payments surplus.
A devaluation of the French franc against other European Monetary System currencies, notably the West German mark, would boost French exports. Other Common Market nations involved in the realignment talks are expected to resist the French initiative because it likely would mean some deterioration of their competitive position with French exporters.
The French franc had been pegged to the same level against the West German mark since March 1983, when the Socialists imposed stringent austerity measures to protect the currency. The franc was devalued three times in the two years that followed the Socialist election victory in 1981.
The suspension of currency dealings comes just four days before the new conservative prime minister, Jacques Chirac, is to outline his government's economic program before the National Assembly.