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City: System failure

Jeremy Warner
Saturday 31 July 1993 23:02 BST
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SO MUCH has been written and said about the demise of the ERM that there's scarcely anything left to add. It's been an even ruder awakening for the French than for Britain, but finally they too have begun to realise that you cannot hope to keep a fixed exchange rate system alive when the economic interests of member currencies have begun to diverge as much as they have in Europe over the past couple of years. No amount of political pride or central bank intervention can match the power of the markets once they decide enough is enough.

For Britain's fragile economic recovery, the end of the ERM can only be good news, bringing as it should a round of interest rate cuts throughout Europe and an easing of recessionary pressures. The London stock market would probably have been heading for higher ground regardless of what happened to the ERM, but I suspect we can now expect to see the FT-SE 100 testing the 3,000 barrier much more quickly.

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