EMS RATE MECHANISM ATTACKED

EMS RATE MECHANISM ATTACKED

Alan Walters, the former economic adviser to U.K. Prime Minister Margaret Thatcher, has condemned the exchange rate mechanism of the European Monetary System as "fatally flawed," newspapers here reported Wednesday.

They quoted Mr. Walters, who resigned last year along with the then Chancellor of the Exchequer Nigel Lawson over their differences, that the EMS had achieved worse economic results for the countries that remained within the system than those that remained outside.Mr. Walters also told a lecture at London City University that though the EMS had stabilized exchange rates in the European Community, it had failed to do so on a weighted-average basis.

Mr. Walters, however, acknowledged that inflation was higher in the United Kingdom than in countries that are full EMS members, but drew a link between the high rate and the fact the United Kingdom had pegged sterling to the deutsche mark in 1987 until 1988 under Chancellor Lawson.

Mr. Walters said bringing down inflation to the EC level - which current Chancellor John Major has suggested is the most important condition to be met before joining the EMS, is relatively easy.