LONDON -- Thousands of mortgage-holders, wage earners and small business owners were saved yesterday from the pain, and in some cases financial ruin, that Prime Minister John Major was prepared to inflict on them in his quest to save the pound from devaluation.
Now it is Mr. Major, the Conservative Party leader, who faces the pain, the humiliation of failure, and possibly political ruin.
The Labor Party's shadow finance minister, Gordon Brown, declared that the government's "credibility was shot down in flames" by the events of what is now being called "Black Wednesday."
Britain's sudden floating of the pound and withdrawal from the European Exchange Rate Mechanism (ERM), the system put into place in 1979 to end monetary instability by holding all EC currencies in equilibrium, takes the currency into even more uncertain waters.
There will be calls for Mr. Major's resignation, and that of his finance minister, Norman Lamont, from the opposition parties when Parliament meets in emergency session to discuss the economy next Thursday.
Worse for Mr. Major may be agitation against him within the Conservative Party itself by those members of Parliament who share Margaret Thatcher's animosity toward the European Community and have opposed Mr. Major's policy of taking Britain to the "heart of Europe."
The prime minister and his Cabinet met yesterday to craft a new, coherent economic policy to present to the House of Commons next week.
A government spokesman said afterward that the Cabinet had agreed that the decision to take sterling out of the ERM was necessary. He said it did not signal a failure of policy but was a reasonable reaction to a coalescing of unprecedented forces that battered the pound so much that even the ERM could not protect it.
These circumstances included the unexpectedly high cost of German unification, the political volatility surrounding the French referendum on European political and monetary unity, and all the ensuing chaos in the currency markets.
The official stressed that the withdrawal from the ERM was only temporary, that Britain, recognizing the discipline the ERM offers, would soon rejoin. Britain, he said, was still committed to Europe.
The official also suggested that the speculation against the pound that brought on Wednesday's dramatic events might not have happened had certain members of the German Bundesbank not been making anonymous suggestions to the press that the pound should be devalued.
Yet, he insisted, Britain was not blaming Germany for what had happened, although Mr. Major had telephoned and expressed his annoyance to Chancellor Helmut Kohl.
Meanwhile, British government financial officials, meeting with their counterparts in Brussels, Belgium, through yesterday morning, set about trying to tighten up the increasingly rickety ERM. They agreed to allow the Italian lira to withdraw from the ERM, temporarily with the pound, and to a 5 percent devaluation of the Spanish peseta.
The anarchy on the exchange markets caused Belgian Finance Minister Philippe Maystadt to assert that the turmoil "is a clear proof that the single market cannot be realized without the single currency."
In the weeks leading up to Wednesday's debacle of the pound, Mr. Major had been resolute, even Churchillian, in his determination not to allow sterling to slip out of its range of parity with the German mark within the ERM.
Last week he said: "The soft option, the devaluers' option, would be a betrayal of our future. And it is not the government's policy."
His was an anti-inflation strategy. Devaluation, he insisted, would increase inflation in the British economy by raising the cost of imports and generally make British industry much less competitive. He said that he was determined to squeeze inflation entirely out of the economy and that he had been successful in reducing it significantly, thanks mainly to the discipline of the ERM structure.
Many people approved of Mr. Major's strategy and admired his tenacity. Others argued that while getting rid of inflation might be a worthy aim, it was not worth the utter destruction of the economy to bring it about.
To ward off devaluation, Mr. Major vowed to put interest rates up to unprecedented levels, which he did Wednesday, by 5 percentage points in two heart-stopping jumps. When this failed, along with all attempts to prop up the pound by a massive buying of sterling on the part of the Bank of England, he dropped interest rates back to only a 2-point increase and took the pound out of the ERM.
By midday yesterday, the pound had effectively lost about 10 percent of its value against the German mark. (Since Monday it has lost about 14 cents to the dollar.) With the battle lost, his government restored interest rates to 10 percent.
Tens of thousands of indebted people, who had expected crushing increases in their monthly payments, breathed more easily.