The 1976 cabinet – a Labour government under James Callaghan – faced a current account deficit that was making markets anxious, as well as raging inflation and rising unemployment. But by far its most pressing dilemma was that – if it failed to reach an agreement with the IMF – it would lose control over the exchange rate. A steep fall in the pound, the cabinet concluded, would have “implications for prices and unemployment that could break the partnership between the government and the unions”.
Richard Roberts takes a look at the 1976 IMF crisis and the parallels it has with Brexit.
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This article first appeared in Financial World
, the journal for The London Institute of Banking & Finance.