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Encyclopedia > European Monetary System

There are three stages of monetary cooperation in the European Union. Moneys is an agreement within a community, to use something as a medium of exchange, which acts as an intermediary market good. ...

Contents

Stage I

main article: European Currency Unit The European Currency Unit (â‚ ; ECU) was a basket of the currencies of the European Community member states, used as the unit of account of the European Community before being replaced by the euro. ...


European Monetary System (EMS) was an arrangement established in 1979 under the Jenkins European Commission where most nations of the European Economic Community (EEC) linked their currencies to prevent large fluctuations relative to one another. For the song by the Smashing Pumpkins, see 1979 (song). ... The Jenkins Commission is the European Commission that held office from 1977 to 6 January 1981. ... The European Community (EC), most important of three European Communities, was originally founded on March 25, 1957 by the signing of the Treaty of Rome under the name of European Economic Community. ...


After the collapse of the Bretton Woods system in 1971, Most of the EEC countries agreed in 1972 to maintain stable exchange rates by preventing exchange fluctuations of more than 2.25% (the European "currency snake"). In March 1979, this system was replaced by the European Monetary System, and the European Currency Unit (ECU) was defined. Wikipedia does not have an article with this exact name. ... The European Currency Unit (â‚ ; ECU) was a basket of the currencies of the European Community member states, used as the unit of account of the European Community before being replaced by the euro. ...


The basic elements of the arrangement were:

  1. The ECU: A basket of currencies, preventing movements above 2.25% (6% for Italy) around parity in bilateral exchange rates with other member countries.
  2. An Exchange Rate Mechanism (ERM)
  3. An extension of european credit facilities.
  4. The European Monetary Cooperation Fund: created in October 1972 and allocates ECUs to members' central banks in exchange for gold and US dollar deposits.

Although no currency was designated as an anchor, the Deutschmark and German Bundesbank were unquestionably the centre of the EMS. Because of its relative strength, and the low-inflation policies of the bank, all other currencies were forced to follow its lead. This situation led to dissatisfaction in most countries, and was one of the primary forces behind the drive to a monetary union (ultimately the Euro). The European exchange rate mechanism (or ERM) was a system introduced by the European Community in March 1979, as part of the European Monetary System (EMS), to reduce exchange-rate variability and achieve monetary stability in Europe, in preparation for Economic and Monetary Union and the introduction of a single... A 10 Deutsche Mark banknote from Germany 1993 showing Carl Friedrich Gauss (http://www. ... The Deutsche Bundesbank is the central bank of Germany and a part of the European System of Central Banks. ...


Periodic adjustments raised the values of strong currencies and lowered those of weaker ones, but after 1986 changes in national interest rates were used to keep the currencies within a narrow range. In the early 1990s the European Monetary System was strained by the differing economic policies and conditions of its members, especially the newly reunified Germany, and Britain (who had initially declined to join and ony did so in the late 1980's) permanently withdrew from the system. This led to the so-called Brussels Compromise in August 1993 which established a new fluctuation band of +15%. An interest rate is the price a borrower pays for the use of money he does not own, and the return a lender receives for deferring his consumption, by lending to the borrower. ...


Stage II

main article: European Exchange Rate Mechanism  Eurozone countries  ERM II countries  other EU countries  unilaterally adopted euro The European Exchange Rate Mechanism, ERM, was a system introduced by the European Community in March 1979, as part of the European Monetary System (EMS), to reduce exchange rate variability and achieve monetary stability in Europe, in preparation for...


The European Monetary System was no longer a functional arrangement in May 1998 as the member countries fixed their mutual exchange rates when participating in the euro. Its successor however, the ERM-II, was launched on January 1, 1999. In ERM-II the ECU basket is being discarded and the new single currency Euro has become an anchor for the other currencies participating in the ERM 2. Participation in the ERM 2 is voluntary and the fluctuation bands remain the same as in the original ERM, i.e. +15 percent, once again with the possibility of individually setting a narrower band with respect to the euro. Denmark and Greece became new members ISO 4217 Code EUR User(s) Andorra, Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Kosovo, Luxembourg, Monaco, Montenegro, the Netherlands, Portugal, San Marino, Slovenia, Spain, Vatican City Inflation 1. ...  Eurozone countries  ERM II countries  other EU countries  unilaterally adopted euro The European Exchange Rate Mechanism, ERM, was a system introduced by the European Community in March 1979, as part of the European Monetary System (EMS), to reduce exchange rate variability and achieve monetary stability in Europe, in preparation for... January 1 is the first day of the calendar year in both the Julian and Gregorian calendars. ... 1999 (MCMXCIX) was a common year starting on Friday, and was designated the International Year of Older Persons by the United Nations. ... ISO 4217 Code EUR User(s) Andorra, Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Kosovo, Luxembourg, Monaco, Montenegro, the Netherlands, Portugal, San Marino, Slovenia, Spain, Vatican City Inflation 1. ...


Stage III

main article: Economic and Monetary Union of the European Union In economics, a monetary union is a situation where several countries have agreed to share a single currency among them. ...


The EMS-2 is sometimes described as "waiting room" for joining the Economic and Monetary Union of the European Union. In the EMU (stage III) the actual currencies in the participating member states are replaced by Euro banknotes and coins. In economics, a monetary union is a situation where several countries have agreed to share a single currency among them. ... ISO 4217 Code EUR User(s) Andorra, Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Kosovo, Luxembourg, Monaco, Montenegro, the Netherlands, Portugal, San Marino, Slovenia, Spain, Vatican City Inflation 1. ... The euro sign in its official logo form. ... The euro (EUR or €) is the currency of 13 European Union (EU) member states (Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Slovenia, and Spain), three European microstates which have currency agreements with the EU (Monaco, San Marino and the Vatican City State), Andorra, Montenegro and the...


References

Ludlow, Peter. The making of the European monetary system. A case study of the politics of the European community. London: Butterworth, 1982


  Results from FactBites:
 
European Monetary System - Wikipedia, the free encyclopedia (457 words)
European Monetary System (EMS) was an arrangement established in 1979 under the Jenkins European Commission where most nations of the European Economic Community (EEC) linked their currencies to prevent large fluctuations relative to one another.
In March 1979, this system was replaced by the European Monetary System, and the European Currency Unit (ECU) was defined.
The European Monetary System was no longer a functional arrangement in May 1998 as the member countries fixed their mutual exchange rates when participating in the euro.
  More results at FactBites »

 
 

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