WEDNESDAY To

From BLACK WEDNESDAY to

he Exchange Rate Currency speculators government was incapable Mechanism (ERM), (including George Soros) (except at unreasonable cost) established in 1979, sold sterling in such massive of buying enough to hold its was a precursor to quantities that the British value above the lower bound theT euro. required by membership of Each member nation the ERM. retained its own currency – But the story of the book the deutschmark, franc, lira, begins earlier, with Britain’s etc. – but agreed to hold 1990 entry to the ERM. their exchange rates within a And its story is yet to end, narrow range. according to the authors, who This required governments argue that Brexit is ultimately to buy their national currency a consequence of Britain’s ill- when its value approached judged entry to the ERM and the agreed lower bound and poorly managed exit from it. sell it when it approached the Six Days provides a compact upper bound. and engaging behind- Six Days in September: Black the-scenes account of the Wednesday, Brexit and the political drama and economic Making of Europe, (by William decisions that drew Britain Keegan, David Marsh and into the ERM and that Richard Roberts), refers to the eventually forced it out on days in 1992 when Britain was the September 16 1992. forced out of the ERM. Among the latter was the 32 REVIEWED 2 reluctance of Germany’s The real value of Six Days, and businesses. central bank, the Bundesbank, however, lies not in the Whereas Britain’s to support sterling. This, the economic analysis of the departure from the ERM was authors contend, damaged ERM but in the light it shines involuntary, Brexit is a still the ongoing relationship on what actually went on debated majority decision. between the UK and the rest between the many important Leaving the ERM turned out of the EU. figures involved, and how they to be a blessing. Having an But, as Six Days makes clear, dealt with the trials thrown independent monetary policy no single decision accounts their way – or, equally often, contributed to lower inflation for Britain’s departure from the ERM. Beyond simple errors of A COMPACT AND ENGAGING judgement, it was the result of a complex web of differing BEHIND-THE-SCENES ACCOUNT and often competing national OF POLITICAL DRAMA AND interests. France was concerned with expanding its economy, ECONOMIC DECISIONS while Britain’s goal was mainly reducing inflation. Germany, too, was interested in fighting failed to deal with them. and sustained economic inflation by maintaining a high It highlights the importance growth for Britain. interest rate. of trust between members Could independence in Such competing economic of the same parliament, and commercial regulation and interests made the ERM the importance of getting the trade policy have a similar inherently unstable. The right messages across. effect to independence in costs of staying within the The public comment by monetary policy? parameters of the ERM were Helmut Schlesinger, then Many say Brexit will be worthwhile for some countries president of the Bundesbank, an economic calamity. but not for others, Britain’s that further ERM pressure Then again, that was a 15 years of uninterrupted was likely before September common response to Black economic growth following 20 sparked misunderstanding Wednesday• Black Wednesday being and decreased confidence in “exhibit number one”. both consumers Allison Chia

ALLISON CHIA is in STUDENT the Upper Sixth at SPOTLIGHT Headington School, Oxford. She submitted this review after reading previous editions of EA. Allison is joint head of her school’s Economic Magazine, where she also plans to launch an economics society. If you’re interested in writing an article for us, email: [email protected]

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