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Black Wednesday | ||
The currency speculators' attack When the French referendum on the Maastricht Treaty yielded a yes vote, the attack, which had gathered force over the first fortnight of September, concentrated on the Italian lira and the pound sterling. Speculators borrowed pounds and lire and sold them for DM, in the expectation of being able to repay the loan in devalued currency and to pocket the difference. On September 16 the British government announced a rise in the base interest rate from an already high 10% to 12% in order to tempt speculators to buy pounds. Despite this and a promise later the same day to raise base rates again to 15%, dealers kept selling pounds. Major currency traders like Goldman Sachs knew what the British Government was trying to do and knew that the international money markets would eventually prevail against the efforts to prop up the pound. This amounted to a major transfer of wealth from the government to the speculators, both individuals and investment banks. By 7pm that evening, Norman Lamont, then Chancellor, announced The aftermathOther ERM countries such as The effect of the high German interest rates, and so the high British interest rates, had been arguably to put In the months and years following Black Wednesday, the pound traded substantially below its ERM lower band. It dipped below 2.20 Deutsche Mark in spring 1995. From this point onwards however, it began a sustained recovery and, at one point, touched the value of 3.20 DM. Some commentators believe that 'Black' Wednesday has proved to be good for the British economy in the long-term, as interest rates were allowed to find their natural level and the government was encouraged to adopt institutional changes that have further strengthened the economy. Indeed the performance of the UK economy subsequent to the events of Black Wednesday has been significantly stronger than that of the Eurozone and, despite the damage caused to the economy in the short term, many economists now use the term 'White Wednesday' to describe the day (a term originally coined by Euro-sceptics happy at the stalling of further European integration). According to figures from the OECD, the average annual growth rate between 1996 and 2005 works out at 2.2% in France, 1.5% in Italy, 1.3% in Germany, 2% for the Eurozone overall and 2.7% in the UK. However, the reputation of the Conservatives for competent handling of the economy was shattered. The Conservatives had recently won the 1992 General Election, and the EU economists' analysis of this event concluded that stable exchange rates are the result, not the cause, of a common approach to economic management, resulting in the Stability and Growth Pact that underpins ERM II and subsequently the Euro single currency. FutureTechnically any country wishing to join the single European currency would have to join an ERM-like system tagging their current currency to the euro. However given the notoriety of the system within the British public at large, many believe this will not be a prerequisite should Copyright 2008 - France BtoB from Wikipédia
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