17 September 1992 From a leading article after Black Wednesday
THE CHAOS of yesterday makes it important to separate the issues raised by the collapse of the pound. In the next few days, the extent of the Europe-wide realignment of currencies taking place will become clear. For the British Government, devaluation, however presented, has severe political implications.

Both the Prime Minister and the Chancellor nailed their reputations to the mast of the DM2.95 central rate. Suspension from the ERM seems to be presented as a temporary measure: maybe the Government intends to return some day at DM2.95. But just as it is hard to conceive any such arrangement that would be credible, so it is hard to see Norman Lamont continuing in his present office. John Major is gravely damaged.

The reputations of British politicians matter less than the prosperity of Western Europe. There are profoundly important lessons for the whole of the EC in the experience of the past few days. One is that at this stage of the EC's development, when governments have conflicting economic policies, some flexibility of exchange rates is still needed.

A second is that it is far better to acknowledge early that exchange rates do have to change while the EC member states follow divergent economic policies: common economic policies may not be a sufficient condition for stable currencies, but they are a necessary one.

A third is that Europe needs a monetary policy designed for the entire continent, not one tailored to suit the needs of a newly unified Germany. The overriding message of the crisis is less that sterling, the lira, and other weaker EC currencies needed to be devalued. It is that Europe needs some form of the Maastricht treaty. In its detail it may be flawed; but we urgently need a workable version.