CITY AND SUBURBAN
Duck loves Garbo, or the patching up of the Winships of Downing Street
CHRISTOPHER FILDES
It was a melting moment, in the Grand Committee Room of Westminster Hall, when peace broke out between the Winships of Downing Street. For an hour and a half Nigel Lawson had been keeping the Commons' Treasury Committee happy at Jacques Delors' expense. Finally the graceful Giles Radice came on, like a change bowler in the last over, to lob up a familiar question — when would the time be ripe to join the exchange rate mechan- ism of the European Monetary System? To his visible surprise, he got an answer. Next year, said the Chancellor, is supposed to bring the free flow of capital across fron- tiers in Europe. We should wait and see what happened, and how the EMS stood up to it, before deciding whether to put sterling in. It is a test that makes sense. The Italians, in particular, have argued for years that, once money was free to leave the country without having to be packed in a suitcase and rowed across a lake into Switzerland, the strains would be tre- mendous — that they could either have free capital movements or EMS mem- bership, but not both. Putting sterling into the EMS would produce strains of its own. Some 14 months ago, I likened Nigel Lawson and Margaret Thatcher to the couple in James Thurber's story 'The Breaking Up Of The Winships'. Thurber tells us that Mr and Mrs Winship had gone to see Greta Garbo in Camille, and came back arguing mildly about her greatness as an actress. Finally Mrs Winship challenged her husband to name anyone greater, and he named Donald Duck. Into these casual- ly taken positions the two of them found themselves entrenched, until Mrs Winship became an obsessed Garboist and Mr Winship a monomaniac Duckite, and a perfectly workable marriage came apart. The Duck and Garbo factions in Downing Street emerged when the pound and the mark were much where they are now, and the question, as now, was what if anything to do about it. In the event, the pound's problems proved short-lived, and other problems succeeded them — but not be- fore the Duckites and Garboists had dug themselves in on the merits of EMS mem- bership and the dangers of bucking the market. As with the Winships, the argu- ment had seemed to develop a life of its own. Key and Trey on the foreign ex- change desks care neither for Duck nor for Garbo, but they can recognise the symp- toms when they see them — and that has
been the largest and the least necessary part of the troubles, leaving the pound vulnerable to anything and everything that comes along. In all my years of watching the pound fall out of bed, I have never until now seen it pushed out by one month's — highly dubious — retail sales figures. Those years teach that, once a currency becomes a one-way market, no interest rates can hold it. When the sudden slide or jump is over, and we are back in a two-way market, interest rates make them- selves felt. So this week's tactical handling of sterling makes admirable sense. But what has mattered most has been the patching up of the Winships.
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