Shark's fm soup
JUST when you thought it was safe to go back into the water, spot that old triangular fin. Yes, it's the European exchange rate mechanism, back again by lack of popular request — and Kenneth Clarke, flying off to fair Verona, is about to have its merits urged on him. It never quite went away, but when the market's pressures were pulling it apart three years ago, it was reconstructed in so loose a form as to be mercifully inef- fective. Now the idea is to tighten it up again, and then to use it as a kind of ante- room for the European single currency. Countries not ready to join that should join the ERM instead. This will stop them tak- ing unfair advantage by devaluing, or so Mr Clarke will be told when he is not being taken to see the balcony where Juliet appeared to Romeo. I hope he will say that if devaluing were really an advantage, coun- tries might reasonably want to take it especially if they had high unemployment and no other way of pricing their people into work. It was Jacques Delors who con- ceived the idea that the old ERM would evolve into a single currency, and Nigel Lawson who said it would no more do that than an elephant would evolve into a hip- potamus. The ERM, like Bretton Woods, was supposed to be a system where exchange rates were normally fixed, but could be changed by agreement. They proved easier to fix than to change, but without that flexibility the system could not take the strain, and finally cracked up. Our own commitment to the ERM cracked ear- lier, which was an overdue bit of luck for the British economy and, proving fatal to the previous Chancellor, was a well-timed bit of luck for Kenneth Clarke.
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