LONDON -- Battered by nearly two weeks of financial turmoil in which a sharp drop in the pound sterling forced Britain's withdrawal from the protection of Europe's Exchange Rate Mechanism, the Conservative government yesterday reasserted its commitment to the European Community in general and to the Maastricht Treaty of European political and economic union in particular.
"It is in the interests of Britain, our interests, our objectives, our prosperity, for us to be part of the development of our continent," Prime Minister John Major said.
"I mean playing a leading role in the EC. I mean helping to determine the direction of policy, building the policies that we wish to see and fighting against those that we do not wish to
In an effort to undercut growing anti-Maastricht sentiment in Parliament, Mr. Major said of the treaty: "There is much in it that we want. . . . With the consent of this House of Commons, I agreed with that bill. I do not believe it would be proper for a British prime minister to agree to a treaty and then come back to the House of Commons and disown it."
Apprehension in Europe's financial markets that the treaty might be defeated in last Sunday's referendum in France began the speculation drive that eventually overwhelmed the pound.
Mr. Major spoke before a packed and sometimes noisy emergency session of Parliament called to discuss the financial crisis facing the country, and to present and win support for the government's economic strategy for dealing with it.
It was also the occasion of John Smith's first speech as leader of the Labor Party, and it was a fierce debut. In it he accused Mr. Major of having a Walter Mitty view of the world, a detachment from reality as well as "delusions of grandeur."
He described him as "a devalued prime minister of a devalued government" and dismissed his presentation before the House as "a long, rambling piece of nonsense."
Though he pledged to keep Britain in Europe, Mr. Major said he would not take the country back into the ERM in the immediate future, or at least not until it was reformed.
"I do not believe that we shall be able to go back into the mechanism soon or into the same mechanism we left last week," Mr. Major said. He did not spell out what reforms he thought would be necessary.
The ERM was put into effect in 1979 to prevent drastic fluctuations in the values of the 12 EC currencies by confining each to a band within which it can move upward or downward. Currencies under attack by speculators can rely on the assistance of other governments to come to their aid; the idea was to discourage speculators by making their attacks financially painful.
The conservative German Bundesbank sets the rigorous standards ERM members are supposed to adhere to through the manipulation of their interest rates, money supplies and public spending.
Mr. Major yesterday gave the ERM credit for having helped Britain bring its inflation rate down from nearly 11 percent in 1990, when it joined, to just over 3.5 percent today, and interest rates down from 15 percent to 10 percent.
However, the attack on the pound last week was so exceptional, he said, his government could do nothing but withdraw from the ERM. "There was no choice. The mechanism, no mechanism, could have survived a market attack on the scale that occurred last Wednesday.
"One after another, not just sterling, the currencies of Europe came under fire," he added.
The Spanish peseta and the Italian lira were also devalued, and the lira also left the ERM.
Mr. Major thus accepted no responsibility for what happened to the pound, and suggested once again that it might not have been hit so hard had unnamed people in the Bundesbank not suggested the pound was overvalued.
"A market encouraged by injudicious comments about realignment, that should never have been made, then turned on sterling," he said.