The ERM was conceived as a forerunner to a single European currency. The aim was to use the collective clout of central banks to engineer a smooth transition to one unit of exchange. But it did rather ignore the fact that not all European economies pull in the same direction at once.
To give the Iron Lady her due, Margaret Thatcher was never a great fan of ERM. It was John Major, as Chancellor of the Exchequer, who drove the process forward. He was prime minister by the time the cracks appeared and Norman Lamont had inherited the Chancellorship.
Seen at the time as a reward for his loyal support in the leadership contest, it turned out to be a poisoned chalice.
In the early 1990s Britain was still reeling from the effects of recession. Spiralling house prices had been replaced with negative equity. The time had come for cheaper money to restore confidence. But this was not on the German agenda.
In the summer of 1992, the reunification of Germany had created strains in the economy and the bankers in Frankfurt were anxious to ensure that the unleashing of pent-up consumer demand in the former East Germany did not lead to rising inflation.
At the September meeting of finance ministers chaired by Norman Lamont, he endeavoured to secure rising German interest rates. It must have been difficult for a British chancellor, used to being able to set interest rate policy himself, to realise this was not in a German politician's gift.
Of course, it was not just Britain that suffered. Italy was forced out, leaving the field clear for speculators against sterling. The Government's frenzied attempts to avoid ejection - including bringing bank rates to 15 per cent - were to no avail. Despite the Bank of England throwing nearly pounds 20bn at the problem, the pound had to withdraw.
There are, of course, lessons to be learned. It is worth remembering that EMU stands for economic and monetary union - not, as many people believe, for European monetary union.
A single European currency means a single European economy. Sceptics will point to the fact that what is good for Leipzig may not be so efficacious in Lille or Liverpool.
But Brussels remains committed to the experiment. It will be interesting to see whether it becomes an even greater embarrassment than that of Black Wednesday just five years ago.
Brian Tora is chairman of the investment strategy committee at Greig Middleton. He can be contacted on 0171 6554000.Reuse content