Jan. 21 (Bloomberg) -- French Finance Minister Christine Lagarde said the Bank of England should do more to support the pound after it fell to the lowest since Margaret Thatcher was prime minister.

“The Bank of England does what it can, but its monetary policy, its rate management isn’t very efficient in providing more support for the British currency” Lagarde told lawmakers at the National Assembly in Paris today. “It’s in its interests to support it a little more.”

Lagarde joins Irish Finance Minister Brian Lenihan in questioning the U.K.’s management of its currency. Lenihan said this month that Britain is engaging in a “competitive devaluation” of the pound, which helps exporters at the expense of companies in other European nations.

The pound’s slide worsened in the past two weeks after the Bank of England cut its benchmark rate to the lowest since its foundation in 1694 on Jan. 8, and Prime Minister Gordon Brown was forced into a second rescue of the U.K. banking system.

Policy makers have refused to signal concern about the pound’s slide and Bank of England Governor Mervyn King said yesterday that a weaker currency will help bring the country out of recession. The pound dropped as much as 2.2 percent today $1.3622 today, the lowest since 1985.

“Currency markets are worrying about the pound’s level looking at the British economy,” Lagarde said. The U.K. is the euro area’s biggest trading partner. The economies of Britain, Germany, France and Italy will all contract this year, European Commission forecasts published this week showed.

‘Immense Pressure’

Lenihan said in an interview with the Irish Independent published Jan. 10 that British economic policy is putting other countries under “immense pressure.” The Finance Ministry confirmed the comments.

A U.K. Treasury spokesman declined to comment on the pound after Lagarde’s comments and said that the Bank of England’s policy is to target inflation, not the currency. The central bank also refused to comment.

“The Bank of England has been burnt in the past trying to control the currency,” said George Buckley, an economist at Deutsche Bank AG in London. “Now they have one instrument and one target, and that’s interest rates and inflation.”

The U.K. was ejected from the European Exchange Rate Mechanism, the precursor to the euro, in 1992 when it failed to prop up the pound against Germany’s deutsche mark.

Lagarde also said European finance ministers need to consider whether to give the European Central Bank an increased role in financial stability and whether nations need to coordinate policies more during a crisis.

She also said that Timothy Geithner, Barack Obama’s nominee for Treasury Secretary, will be “open to European positions” and “keen to improve regulation.”

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net. Helene Fouquet in Paris at hfouquet1@bloomberg.net

Last Updated: January 21, 2009 13:48 EST