O Sunday morning 1 August 1993, Belgium was in mourning. That morning, the government of Jean-Luc Dehaene consulted at 16 rue de la Loi about the succession of the suddenly deceased King Baudouin. Further up in the Borschette building on Schumanplein, the European finance ministers and their central bankers arrived. They worked through the night from Sunday to Monday to hold the faltering European Monetary System (EMS) together for the opening of the Tokyo stock exchange.

During 1992, the Italian lira had devalued and the British pound had flown out of the EMS. The Belgian franc then held out. Now, according to traders in London and New York, gigantic speculative sell orders were ready, especially in French francs. To keep things together, at the request of the French, the flexibility of the EMS was increased and the bandwidth of the agreed central rates between the currencies of the EMS members increased from 2.5 to 15 percent. The French had hoped to free the Belgians from the German camp. Finance Minister Philippe Maystadt listened to this. But Governor Fons Verplaetse of the National Bank of Belgium insisted on pegging the franc to the mark he forced in 1990.

On August 9, the day of King Albert II’s inauguration, the franc’s discount against the mark had already risen to 4.48 percent. The Flemish press turned against Verplaetse. Leuven economists, headed by Paul De Grauwe, published a manifesto demanding the separation of the franc from the mark. In parliament, VLD chairman Guy Verhofstadt denounced Verplaetse’s idiosyncrasy.

In September, Jerry Van Waterschoot gave in to the Financial-Economic Time: ‘The National Bank has lost its pedals.’ He accused Verplaetse of lighting the fire with clumsy statements. The statements he was referring to had been printed in his newspaper a few days earlier. There, Verplaetse had said: “If the social pact does not come about between the social partners and if the government fails to impose this pact, the franc will come under heavy pressure.”

“And are you just going to wait that long?” came a reporter’s question. To which the governor replied that interventions by the National Bank made no sense. ‘If we make interventions, it will be on the Reuters screens within 5 minutes. And then the market tests again. We are always losers in this. That makes no sense. ‘

In that conversation, Verplaetse did not violate the truth just a little bit. He had previously sent Marcia De Wachter, then still spokeswoman for the Bank, for a discreet conversation with Eddy Wauters, chairman of the Kredietbank, to find out how to repel the attack on the Belgian franc.

On Wednesday 25 August, Wauters and De Wachter had lunch in one of the salons of the historic building of the Kredietbank on the Grand Place in Brussels. Wauters was known as a virtuoso operator on the currency market who had made lots of money for the Kredietbank. If anyone could advise the NBB in the rolling speculation, it was him.

The advice of Wauters, who was aware of the enormous foreign exchange reserves of the NBB, was concise: the National Bank should hold it out for three months. It is a matter of resisting and waiting for the first speculators to bet against the franc to redeem their contracts. Then the rest will follow automatically, because speculators are buffaloes: they all storm in the same direction. The plan to involve the major Belgian banks in the matter sprang up in the salon of the Kredietbank.

During the executive committee of Monday 6 September, Wauters’ advice was discussed. It was noted that Verplaetse would meet with the presidents of three major banks “to find out what their attitude was to speculation against the Belgian franc.” But first there was a meeting between Verplaetse and André Bergen, then a member of the executive committee of the Generale Bank, which was chaired in those days by Fred Chaffart. Bergen also had international experience with the currency market.

Afterwards, the governor conferred with Marcel Cockaerts of the Credit Bank, Daniël Cardon de Lichtbuer of the Bank Brussels Lambert and Maurits Wollecamp of Paribas. The major banks were asked to intervene, so that the ‘shorting’ speculators got the impression that the private banks were buying Belgian francs. The NBB acted as counterparty, so that the banks made some money. Bergen acted as the coordinator of the operation. Every two to three days he would come to confessions to Verplaetse and De Wachter in the governor’s hotel.

At the height of the attack in mid-October, the franc’s discount against the mark was 6.5 percent. And it went fast. Bergen even intervened from his kitchen, usually after 4 pm. With not too large purchase volumes, but because of the smart timing with an even greater effect on the market operators.

Every now and then there was a bump, because the banks were in a very ambiguous situation. On the one hand, their fund managers were instructed by their clients, often with faxes from unknown traders, to leave the Belgian franc, while substantial purchases were made elsewhere in the building. Bergen had discussed the situation with Chaffart. He saw the problem: ‘Switching all those funds was an enormous undertaking, because it involved gigantic amounts. That sometimes put us in a difficult position. I once called Verplaetse, who was just checking in on the way to Washington for an International Monetary Fund meeting, to tell him the matter was being delayed. A week later I got him on the phone. He shouted, ‘You are gangsters! Gangsters! ‘ But I had no choice. I could hardly say to the fund managers: you are not allowed to sell. ‘

That secret operation would last three weeks. Even though it started to leak here and there on the international market that the major Belgian banks acted for the NBB. But at the beginning of October, De Wachter noticed a turn in the speculation wave on a Monday morning at the opening of the exchange markets on her Reuters screen. A little later, on Friday 22 October, the report came that the situation of the Belgian franc had improved significantly. The buffalo herd followed, as Wauters had predicted.

Jean-Pierre Pauwels announced at the executive committee of Tuesday 9 November that the speculators had reduced their position on the currency market. The franc’s discount against the mark had fallen to 3.12 percent. The NBB dropped its short-term interest rate. Belief in the Belgian franc was further reinforced by the announcement on 17 November of the agreement in the Dehaene government on a Global Plan for employment, competitiveness and social security. The architect of that reform was Verplaetse, albeit in close consultation with Dehaene.

On December 21, at the last meeting of the year, the NBB Executive Committee was satisfied that the Belgian franc was once again recognized as one of the hard EMS currencies. The link with the Deutsche Mark remained unharmed and the NBB had made money from the operation.

The 1993 NBB annual report did not mention what economist and former banker Theo Peeters elegantly described as ‘the civic spirit of the Belgian banks’ in speculation against the franc.