CITY AND SUBURBAN
The pound now buys a matchless opportunity to make the same mistake twice
CHRISTOPHER FILDES
The pound is now so strong — well, everything is relative — that if it gets any stronger it will reach the point where we spend £4 billion in a day vainly trying to stop it crashing out of Europe's exchange rate mechanism. The German mark (as I was saying last week) is being perceived as a proxy for a floppy rubber euro, and the Pound is attracting funk money because it must still have a sporting chance of staying out. This has had a bizarre side effect: it has. revived the idea that the pound ought to Join the ERM. You thought that con- traption had come apart some time ago? Yes, it did, but it got patched up and is lurching along again, now with the Italian bra on board. Currencies which aspire to Join the euro are encouraged to treat a spell within the ERM as an induction pro- gramme. Michael Saunders at Salomon Brothers now thinks it odds-on that a Labour Chancellor would put sterling in the ERM. This would, he says, be an eco- nomic choice made for political reasons a gesture of Euro-solidarity. Gesture poli- tics are futile enough but gesture eco- nomics can be dangerous, and the combination lethal. Before the next Chan- cellor takes up his job he should ask the Previous Chancellor to tell him how he lost it.
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