Lamont tries to pacify Germans: Finance ministers at Brussels meeting rebuff proposals by Chancellor to overhaul ERM

Norman Lamont effectively apologised to Germany last night in an attempt to ease the tension caused by sterling's withdrawal from the European exchange rate mechanism.

At a news conference in Brussels, the Chancellor admitted that Horst Kohler, the German finance minister, and other ministers had expressed dismay at some of the comments made in Britain about Germany and the Bundesbank during the recent currency crisis.

'Obviously, some harsh and difficult things have been said. There has been a lot of controversy. We have had our differences and I am sorry if it has caused offence. But I'm not responsible for everything in the press,' he said.

However, the Treasury insisted later that Mr Lamont had not made a formal apology.

John Smith, the Labour leader, is expected to make Mr Lamont's remarks a key feature of his speech to his party's conference in Blackpool today.

The Chancellor's comments will upset and confuse many rank- and-file Tories who have accepted the line adopted by Mr Lamont and the Prime Minister in the Commons debate last week that the Bundesbank bore a large part of the blame for the run on the pound.

John Major sharply criticised a Bundesbank briefing for undermining sterling and many Tories are angry that Germany did not support sterling in the way that it later supported the French franc.

Earlier, EC finance ministers rebuffed an attempt by Mr Lamont to consider a fundamental overhaul of the ERM as the Government attempted to cover up damaging splits in the Cabinet over Europe.

But in Brussels yesterday, other finance ministers and their officials were resolute that the system did not need fixing. A communique called only for 'reflection and analysis' on market turbulence.

The meeting was marked by friction between Britain and Germany. Mr Kohler demanded that Mr Lamont clarify Conservative criticism of the Bundesbank. 'Monetary co-operation in Europe is too important to be tossed around in this way. It's not the time to make wild accusations or look for scapegoats.'

Mr Kohler also demanded that the question of whether Britain should continue to receive a rebate from its contributions to the EC budget should be reopened. The ministers rejected the idea of a two-speed Europe, with one group of nations proceeding with monetary union. Diplomats saw Britain's attempt to overhaul the ERM as a delaying tactic.

Meanwhile pressure is mounting on Mr Major at home and abroad to impose his authority on the Conservative Party. Both the Chancellor and the Prime Minister have said Britain cannot return sterling to the ERM while the 'fault-lines' in the system persist.

Ministerial sources said Mr Major was expected to use a political discussion at the end of the weekly Cabinet meeting on Thursday to reassert his authority and impress on the Cabinet the need for unity.

The Prime Minister is planning to relaunch domestic policies on health, law and order, and the citizen's charter, at next week's Conservative conference to turn the party away from its splits on Europe. He will hold bilateral meetings with ministers who have been asked to freshen up their policies.

But the domestic issues are certain to be overshadowed by the continuing strains in the Cabinet between ministers led by Mr Lamont, who are opposed to any early re-entry to the ERM, and others, including Kenneth Clarke, the Home Secretary, and Michael Heseltine, President of the Board of Trade, who want a clear commitment to return to the ERM.

Denying a split in the Cabinet, the Prime Minister's office said Cabinet ministers were not 'clones'. Reports that Mr Major had told colleagues to 'back me or sack me' were dismissed by his office as 'absolute nonsense'.

Sir Norman Fowler, party chairman, is due to meet Baroness Thatcher to discuss her plans for attending the conference; thatwill be seen as an attempt to avoid further embarrassment over her anti-Maastricht views.

Richard Ryder, the Chief Whip, is also expected to try to avoid a repetition of the clear differences within the Cabinet which were brought out into the open on Sunday in simultaneous interviews by Michael Howard, Secretary of State for Environment, and John Gummer, Minister of Agriculture. Mr Howard spoke of the 'opportunities' presented by the withdrawal from the ERM, while Mr Gummer warned of the dangers.

(Photograph omitted)