‘Two-Speed’ Europe Idea Is Rejected : Unification: EC ministers refuse a quick fix to calm volatile currency markets. They vow to press ahead on Maastricht treaty.

Despite this month’s upheaval in their currency markets, the European Community’s finance ministers declined Monday to change the Continent’s tattered system of fixed exchange rates and pledged to forge ahead with the Maastricht treaty that would unify their currencies by 1999.

The ministers of the 12-nation EC specifically rejected suggestions that Germany, France and a handful of smaller countries move quickly to a common currency, leaving the others in the slow lane of a “two-speed Europe.”

“Everybody present emphasized their opposition to the concept of a two-speed Europe,” the ministers said in a statement.

The ministers welcomed the recent lull in Europe’s previously tempestuous currency markets. France and Germany joined forces last week in a so-far-successful defense of the French franc after market forces had driven the British pound and the Italian lira out of the exchange rate system.

But all was not calm on European markets Monday. The Irish government raised the interest rate on overnight loans to commercial banks by 3 percentage points, to 13.75%, in an effort to shore up the sagging value of the Irish punt.

And European stock markets suffered deep losses Monday, indicating renewed investor fears of economic fallout from the currency crisis. London’s Financial Times-100 stock index slumped 41 points to 2,560; Paris’ CAC-40 index tumbled 73.27 points to 1,770.26, and Frankfurt’s DAX-30 index dropped 38.32 points to 1,475.04.

Beyond Europe, the dollar fell back nearly to its record low against the Japanese yen, which has become a safe haven for global investors alarmed by the turmoil in Europe and dissatisfied with low U.S. interest rates.

The dollar also fell against most European currencies. Nevertheless, the U.S. stock market recouped some of its recent losses. Late afternoon buying sent the Dow Jones average up 25.94 points to 3,276.26. It had fallen 76.73 points last week.

The EC ministers said any damage repair for the system of fixed exchange rates would have to wait until after the emergency EC summit meeting on Oct. 16 in Birmingham, England.

British Prime Minister John Major, the EC’s president for the last six months of 1992, called the summit to address mounting obstacles to European unity, including the chaos on the currency markets and public opposition to Maastricht.

Britain and Italy were forced to withdraw from the system of fixed exchange rates, and their currencies have since lost nearly 10% of their value. In addition, Spain devalued its peseta by 5%, and Spain, Portugal and Ireland introduced or tightened controls on the transfer of currency abroad.

“This is not how the system was intended to work,” British Chancellor of the Exchequer Norman Lamont said. “It is not a situation that anybody regards as desirable.”

However, the ministers recommended no solutions, choosing instead to voice their “agreement that recent financial turbulence calls for reflection and analysis.”

The ministers also called for a speedy ratification by the EC countries of the Maastricht treaty. The government of Denmark, where voters rejected the treaty in June, is trying to figure a way to reverse that decision. French voters barely ratified the treaty on Sept. 20, and opposition is growing in the British Parliament.

Reports have repeatedly surfaced, most recently on Monday in the German newsmagazine Der Spiegel, that German Chancellor Helmut Kohl and French President Francois Mitterrand last week discussed the possibility of a two-speed Europe if the Maastricht treaty becomes stalled. The German and French governments have denied the reports.

But even the Maastricht treaty would create a common currency in 1999 only for those EC nations with sufficiently low inflation rates, interest rates and budget deficits. “There is a probability that the train will not be composed of 12 cars,” said Luxembourg’s finance minister, Jean-Claude Juncker.

Irish Finance Minister Bertie Ahern said he hoped that the three-point increase in the overnight lending rate could be reversed in three months or so. In the last two weeks, Ireland’s central bank had purchased billions of punts to keep the currency’s value from tumbling below its minimum level in the EC exchange rate system, and even Monday’s increase in interest rates did not lift the punt above the floor.

Outside the EC, Sweden brought its overnight lending rate down Monday from 50% to 40% as speculative pressures eased against the Swedish krone. Sweden had briefly lifted the rate as high as 500% to stem a flood of currency flowing out across Swedish borders.