Magazine article Marketing

Sterling's Shotgun Wedding

Magazine article Marketing

Sterling's Shotgun Wedding

Article excerpt

Sterling's shotgun wedding The Government has finally wedded the pound to the exchange rate mechanism of the EMS. Despite her recent reservations over the desirability of such a match, Prime Minister Margaret Thatcher has bowed to domestic and international pressures.

At the European level the forthcoming inter-governmental conference on monetary union in December faced difficulty. With sterling still unwed, foreign relations were bound to be tricky. Foreign exchanges would be patient only for so long with a pound they perceived to be living in sin.

In reality, domestic circumstances were beginning to upset the wedding preparations. The oil crisis was driving up inflation while every economic indicator warned of recession.

Then Chancellor John Major saw his opportunity. Enter the ERM and bring interest rates down. Recession could be averted and a clamp enforced on inflation. How could the Chancellor refuse a dowry of potential election victory?

How well matched the partners are remains to be seen. With oil prices at about $40 per barrel and interest rate reductions at home, inflation may rise still further. Adjusting to marriage takes time, particularly with the UK labour market set in its ways. Higher inflation, recession and unemployment may yet emerge from this shotgun wedding. …

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