Lessons learned on 'Black Wednesday'
BBC, 15 September, 2002
By Evan Davis BBC Economics Editor

Ten years ago the pound was forced out of the Exchange Rate Mechanism, a system for tying its value to that of other European currencies. Black Wednesday, as 16 September 1992 came to be known, provided one of the most memorable failures of post-war British economic policy.

It was the defining failure of John Major's government; it was a huge boost to Euro-scepticism; it made currency traders like George Soros rich. Policy-makers still bear the scars from that day - when speculators sold the pound, detaching it from its link to the deutschmark.

The Exchange Rate Mechanism (ERM) had been the centre-piece of British economic policy - tie the pound to the deutschmark, it was said and you will get a German-style economy, with stability and low inflation.

In the event, the strategy DID give us low inflation, but not a stable economy. The fact that Britain had to follow German interest rates, combined with the fact that Germany needed tighter monetary policy than Britain at the time, meant the ERM prolonged an already painful recession in the UK.

And leaving the ERM did not seem to hurt us.

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Meanwhile, in Sweden, September 16, 1992

Dagens Nyheter about Sweden 10 years after 1992

Mer om kronkursförsvaret 1992