Letter: ERM is vital to the Single Market's success

Sir: In his column today, William Rees-Mogg reiterates his long-held opposition to the ERM, making, I fear, errors of judgement common to a number of economic commentators and politicians. One of the more serious of these errors was omitting to mention that the ERM was put in place as a facilitator of the trade in goods and services between member states. It has a vital function in the future operation of the Single Market, which surely cannot function properly with significant fluctuations in exchange rates.

One would be hard-pushed to find any politician - and I include Lord Rees-Mogg himself - who is not in favour of the Single Market, and yet opponents of the ERM ignore the fact that currency stability is vital to its success. The logic of the Single Market leads inexorably towards the creation of a single currency, and that logic is as valid now as it was before the sterling crash.

As Gavyn Davies so accurately points out ('Dangers of life outside the ERM', 21 September), it was Margaret Thatcher's xenophobic opposition to ERM entry in 1985 that led to our joining at the wrong time and rate. ERM membership per se has not been the problem, simply the rate of parity. Sterling's weakness has its origins in the dreadful weakness of the UK economy, another crucial factor that is ignored by Lord Rees-Mogg because that economic weakness stems from the period he craves to emulate - the Eighties. He may care to reflect that this, the Lawson candyfloss boom apart, was a period of rising unemployment and poor economic performance, manifested by a fatal narrowing of the UK manufacturing base. Messrs Major and Lamont may be too proud to admit it, but the seeds of the collapse of their economic policy lie not with the Bundesbank but with rotten economic management throughout the Eighties.

Hints at economic isolationism, discernible in Lord Rees-Mogg's column and in the ill-natured and ignorant comments from 10 and 11 Downing Street, are most worrying of all. Sooner or later the operation of the Single Market will once more demonstrate the need for a regulatory framework for all EC currencies, and, I suspect, will provide a cast-iron argument for the ecu, with or without British participation.

Yours faithfully,

JAMES GIBSON-WATT

Hay-on-Wye, Hereford

21 September