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The withdrawal of Britain from the European Exchange Rate Mechanism, designed as a precursor to a European political and currency union, has been described as a "seminal moment in European politics ... on a rank with the first oil shock." This case describes, from the point of view of key British decision-makers, the ways in which the British government of John Major sought to balance political and macroeconomic considerations only to lose its bid to "support the unsupportable" and prevent a devaluation of the pound. The case poses the ERM/pound sterling problem as it was faced by Prime Minister Major and his Chancellor of the Exchequer Norman Lamont. It provides both a primer on contemporary European macroeconomic strategy and tensions, as well as a window on the forces which nation-states must consider today as they set interest rates and decide whether and how to defend their currencies. See also Black Wednesday: The Bundesbank Connection (C18-95-1295.0).