10 Francs – France

In 1986, France found itself navigating a complex and challenging currency environment, shaped by both domestic political shifts and its commitments to the European Monetary System (EMS). The year began with the historic election of a center-right "cohabitation" government, with Jacques Chirac as Prime Minister serving under Socialist President François Mitterrand. This government came to power with a platform of economic liberalization, including a pledge to halt the inflationary spiral and strengthen the franc, which was seen as a cornerstone of French economic credibility within Europe.

The franc's stability was under constant pressure within the EMS's Exchange Rate Mechanism (ERM). While the system aimed to reduce exchange rate volatility, it required member currencies to remain within narrow bands against each other, particularly the Deutsche Mark. The French franc, however, frequently tested the weaker limits of its band, prompting repeated and costly interventions by the Banque de France. These interventions involved selling foreign reserves (primarily Deutsche Marks) to buy francs, a drain on resources aimed at defending a parity that markets often viewed as overvalued given France's higher inflation relative to Germany.

Ultimately, the situation culminated in a major realignment of the EMS in April 1986. Faced with sustained speculative pressure and the political will to prioritize anti-inflationary policies, the Chirac government agreed to an 8% devaluation of the franc against the Deutsche Mark. This move, while a technical adjustment within the rules of the system, was a significant political event. It was framed not as a defeat but as a necessary recalibration to restore competitiveness and allow for a stricter, market-oriented domestic policy—the franc fort (strong franc) policy—which would define French economic strategy for the next decade and deepen its commitment to European monetary integration.