Growth in overseas economies seems to be moderating, in part in response to firm monetary policies in the face of inflationary threats which are present in all the major economies. The strength of the deutschemark, on a reappraisal triggered by developments in Eastern Europe, has complicated the position of other members of the EMS. France and Italy have proceeded with dismantling their exchange controls and Italy narrowed the band in which the lira canjluctuate. This Assessment reviews these developments, the response of the West to the call by Eastern Europe for assistance, and the continuing adjustment of domestic demand in the British economy. The implications for policy of the risks to the consensus UK forecast are considered.