Letter: Devaluation is not the answer

Sir: Norman Lamont is right. Devaluation of sterling within the exchange rate mechanism would only bring higher inflation, without the benefit of any reduction in interest rates. It is not an unrealistic exchange rate that is holding back recovery in the British economy but the high interest rates that the Bundesbank - in pursuit of purely domestic objectives - is forcing on the rest of Europe.

Surely this experience must change the Government's attitude towards closer monetary union with our EC partners, most of whom are likewise becoming weary of continued subservience to German interest-rate policies. A monetary union - including a European central bank - would ensure that monetary policy across Europe is no longer dictated solely by the objectives of just the one dominant partner.

Yours faithfully,

NIGEL WILKINS

London, SW7

14 July