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Britain to Link Pound to Other EMS Moneys

October 05, 1990|From Reuters

LONDON — Britain said today it will tie the British pound to other currencies in the European Monetary System, ending its long opposition to linking its economic policy with the European Community.

The change will take effect Monday and will mean that Britain will have to adjust its economic policies and interest rates to ensure that the pound stays within a certain range against the other currencies in the system.

The EMS already includes almost all 12 members of the European Community.

Britain has been the main opponent of a linked currency system. Prime Minister Margaret Thatcher has said that it would restrict the government's ability to set economic policy.

The battle over whether to join the EMS has also become a symbol of how much power Britain is willing to give up as it moves closer to integration with its fellow European Community nations.

A statement by the Treasury today also said Britain will cut interest rates by 1 percentage point to 14%.

Concerned about inflation, Britain has among the highest interest rates of any of the EC nations.

The announcement was greeted favorably in the financial markets. The bellwether Financial Times-Stock Exchange index of 100 leading shares soared 59.6 points in afternoon trading to 2,1300. The British pound also rose sharply.

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