The European Monetary System: progress and prospects

The European Monetary System (EMS) came into existence in March 1979. It was only when the exchange rate stability of the Bretton Woods system began to disintegrate in the late 1960*s and early 1970's that the need for a separate Community monetary arrangement became a pressing issue. Existing and future economic integration in the EEC achieved through tariff reduction and agricultural policy were apparently under threat as a result of exchange rate instability and uncertainty. The "snake" arrangement of the 1970's which represented an earlier attempt to limit exchange rate variations and secure greater monetary co-operation, did not prove to be entirely satisfactory if only because it contained non-EEC members and perhaps more important did not have in its membership, at least continuously, certain major EEC countries, France, Italy and the UK. This briefing paper reviews the success of the EMS and its longer term prospects.