THE French franc appeared to have met its Waterloo on Europe's foreign exchange markets yesterday. But, as it seemed certain that a defeat in the battle of the franc would also mean the end of the European Monetary System (EMS), a new era of low interest rates in Europe was being predicted. Despite the efforts of the Germans to rescue the franc, by firing a barrage of Deutschemarks at the markets, blame for what is seen as the final blow to the EMS was being heaped on the Bundesbank for being selfish in not cutting in its interest rates, and triggering the latest crisis. On Thursday, the all-powerful Bundesbank committee stood firm against the pleading of the rest of Europe, and refused to lower its key discount rate from 6.75 per cent. Its only concession was a 0.5 per cent cut in the Lombard rate to 7.75 per cent. This was seen as no more than putting a sticking plaster on an arterial wound, and the attack on the franc renewed. As wave after wave of selling crashed over the French franc, the currency fell through its official floor of 3.4305 to the mark at one point. ''The market's actually scented blood. They've actually succeeded in breaching the intervention limit,'' Adrian Cunningham, an economist at BankAmerica in London said. ''It's got to be a matter of time before there's a change of policy.'' But not all analysts are writing off the EMS yet. Robert Hormats, vice-chairman of Goldman, Sachs investment bank, said both Germany and France had a lot to lose politically from the break-up of the Exchange Rate Mechanism (ERM), which they see as an anchor for European unity. At one point markets were thrown into greater confusion as the French Government apparently ordered the central bank to stop supporting the franc, sparking rumours that they had admitted defeat. At around 9 am, European time, when the currency was being held at 3.418 francs to the mark, the bank stepped back. Within 20 minutes the franc had been smashed to its floor, and the bank came back in, according to European foreign exchange dealers. To discuss the crisis French Prime Minister Edouard Balladur had a 40 minute meeting with President Francois Mitterrand. Hopes that these talks might lead to a useful statement were quickly dashed. Mr Balladur instead told reporters: ''There are rules and these rules are working well. They are made for situations like this very one.'' The final blow to the franc's chances of survival in the ERM may have been dealt by Geroge Soros, the international fund manager reputed to have made US$1 billion by betting against the Bank of England when it was mounting its unsuccessful attempt to defend sterling in September of last year. Having earlier promised to stay out of the franc battle, Mr Soros yesterday said that the Bundesbank move had changed the game, and he was now free to sell francs because the EMS was about to break up. He joined others in blaming the Bundesbank for the currency crisis. ''It is futile to attempt to protect the ERM by abstaining from trading in currencies when the anchor of the system, the Bundesbank, acts without regard for the interests of the other members,'' Mr Soros said. The franc was not the only target of foreign exchange dealers. Central bankers in Belgium, Spain and Portugal were also having to support their currencies as the possibility of a mass devaluation following the ending of the EMS appeared stronger. Meanwhile, the US dollar was benefitting as nervous investors switched into the currency as a hedge against further turmoil, and it scored gains against the Deutschemark, the Swiss franc, the French franc and sterling. The currency crisis was welcomed by many stock markets. Experience has shown that when a country moves out of the ERM, its stocks rise as interest rates are no longer kept artificially high to support the currency. The prospect of a European-wide stimulus to economies following the ending of the ERM had investors rushing to buy stocks. In Paris, shares soared to new peaks for the year - with the CAC Index at one point up 50 points to 2086. Since the Bundesbank held its discount rate, French shares have gained 4.16 per cent, while bond prices have also been leaping on expectations of interest rate cuts. The Paris bourse opened with a surge of business, with more than one billion francs worth of stock changing hands in the first half hour of trading. London stocks also continued their recent climb, and the FTSE-100 Share Index was up 15 points to 2,932.6 in midday trading. Driven by hopes of domestic interest rate cuts, the FTSE has gained 106 points this week.