Hungary is a prime example of how to create an uneven playing field. The opinion polls for the 2022 elections were close - the opposition had no chance to win.

In 1992, the United Kingdom had reluctantly joined the ERM, mainly to help with inflation management at home. But in the wake of the Maastricht referendum in France, pressure mounted on sterling and other European currencies. The Government did not want to ease the pressure by increasing interest rates. This would have displeased mortgage owners that voted it in. The small tension turned into a full currency crisis. Following remarks by the Bundesbank president, the Bank had to spend $22 billion yet failed to save the pound. Britain left the ERM and stopped managing the pound altogether. The focus was now no longer on exchange rates but on inflation targeting.

In 1992, the UK had reluctantly joined the ERM, mainly to help with inflation management at home. But in the wake of the Maastricht referendum in France, pressure mounted on sterling and other European currencies. The Government did not want to ease the pressure by increasing interest rates. This would have displeased mortgage owners that voted it in. The small tension turned into a full currency crisis. Following remarks by the Bundesbank president, the Bank had to spend $22bn yet failed to save the pound. Britain left the ERM and stopped managing the pound altogether. The focus was now on inflation targeting, no longer exchange rates.

In October 1990, after a sustained campaign from the Treasury, the UK joined the European Monetary System’s Exchange Rate Mechanism. The move was heavily supported by Leigh-Pemberton, who persuaded the US central banker, Alan Greenspan, to persuade Margaret Thatcher that the ERM was a modern version of the nineteenth century gold standard. UK entry into the EMS ERM was accompanied by an interest rate cut, but the consequences of German unification and of German interest rate moves led to tightening of monetary policy at a moment of UK recession. In September 1992, the UK’s exchange rate became unsustainable as very large speculative flows bet on a UK exit from the mechanism (September 16). The result was initially seen as a massive humiliation for the UK and its monetary policy-makers, Black Wednesday, but quite quickly opinion shifted to considering it as a liberation that allowed policy reform, White Wednesday. The UK’s ERM experience thus became a game-changer in thinking about monetary policy and exchange rates.