ERM was a diversion
From Mr Mike Faulkes Sir: Britain's foray into the ERM 1990-92 has been badly misunderstood. For a considerable period up to 1990 Margaret Thatcher had been repeating the mantra that Britain would enter the ERM 'when the time is ripe'. Suddenly in October 1990 she announced our entry. The Conservative party conference was about ten days away and looked rather forbidding to the government. Joining the ERM created a diversion and a short-term drop in interest rates.
The time was not ripe, however. Longerterm interest rates were high and parity with the deutschmark was too high. To protect such a high parity required headroom to increase interest rates, and the existing high rates made this difficult. The inescapable lesson is that international action should not be influenced by internal party politics. History is littered with unfortunate examples. It is misleading to blame the ERM for specific financial problems and to justify the 1990-92 exploit as a reason to avoid the euro.
Mike Faulkes
Shipston-on-Stour, Warwickshire
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