Exchange-Rate Mechanism

(Photo: EUobserver.com)

Part of the Economic and Monetary System from 1979.

Britain and the ERM

Britain initially remained outside the ERM for political reasons. However, having observed the success of the system, especially in combating inflation, Britain did join in October 1990. This was instigated by John Major and Douglas Hurd who persuaded the then Conservative Prime Minister Margaret Thatcher that Britain should join.

The exchange rate at which Britain joined was too high, and in 1992 currency speculators forced Britain to leave the ERM on a day that became known in infamy as ‘Black Wednesday’. This was one of the most memorable failures of post-war British economic policy, Britain having lost billions trying to maintain the value of sterling.

Exiting the ERM helped Britain out of recession and provided sustained economic recovery. Some have therefore relabelled the event "White" or "Golden" Wednesday.

Links

http://europa.eu.int/scadplus/leg/en/lvb/l25047.htm