Book of the week: The day Britain crashed out of the ERM

published 22 September 2017

Published by OMFIF, £20

On 16 September 1992, the UK was forced to leave the European Exchange Rate Mechanism after abandoning efforts to supportsterling against the deutschmark.

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This new monograph from the Official Monetary and Financial Institutions Forum, a think tank, looks at the history and consequences of this episode: why Britain joined the ERM, why it left and how the crisis affected the future of Europe, including the UK's recent decision to quit the European Union.

While the authors are not the first to argue that Brexit has its roots in Black Wednesday, they take a novel approach. Instead of focusing on how it stirred British antipathy towards the EU, they argue that the main effect was to accelerate European integration.

In their view, policymakers concluded that, if a currency peg was vulnerable to speculative attacks, then the only solution was a full single currency.

It's an interesting argument, though one that is ultimately unconvincing, since ERM was always intended to be a precursor to monetary union. Had Britain stayed within the ERM, it would almost certainly have ended up joining the euro. Still, this is a well-written account that also looks at the history of attempts to manage currencies.

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

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