European Monetary System, EMS

(Photo: EUobserver.com)

A system established in 1979. The EU states which joined agreed to prevent large fluctuations in the values of their currencies relative to one another. It was anticipated that this measure would help to reduce inflation.

In the early 1990s the system came under severe strain due to differing economic policies amongst its member states.

Notes

• For the first decade the system was a success. Foreign exchange fluctuations decreased and inflation decreased.
• Seen as a forerunner of, and a preparation for, Economic and Monetary Union.