The European Exchange Rate Mechanism (ERM II) is a system introduced by the European Economic Community on 1 January 1999 alongside the introduction of a single currency, the euro (replacing ERM 1 and the euro's predecessor, the ECU) as part of the European Monetary System (EMS), to reduce exchange rate variability and achieve monetary stability in Europe. After the adoption of the euro, policy changed to linking currencies of EU countries outside the eurozone to the euro (having the common currency as a central point). The goal was to improve the stability of those currencies, as well as to gain an evaluation mechanism for potential eurozone members. As of January 2023, two currencies participate in ERM II: the Danish krone and the Bulgarian lev. Intent and operation of the ERM II The ERM is based on the concept of fixed currency exchange rate margins, but with exchange rates variable within those margins. This is also known as a semi-pegged system. Before the introduction of the euro, exchange rates were based on the European Currency Unit (ECU), the European unit of account, whose value was determined as a weighted average of the participating currencies. A grid (known as the Parity Grid) of bilateral rates was calculated on the basis of these central rates expressed in ECUs, and currency fluctuations had to be contained within a margin of 2.25% on either side of the bilateral rates (with the exception of the Italian lira, the Spanish peseta, the Portuguese escudo and sterling, which were allowed to fluctuate by ±6%). Determined intervention and loan arrangements protected the participating currencies from greater exchange rate fluctuations. United Kingdom Chancellor of the Exchequer Denis Healey reportedly chose not to join the ERM in 1979 owing to concerns that it would benefit the German economy by preventing the Deutsche Mark from appreciating, at the expense of the economies of other countries. The UK did join the ERM in October 1990 under Chancellor John Major, in a move which at the time was largely supported by business and the press, but was forced to leave again two years later on Black Wednesday. Historical exchange-rate regimes for EU members The chart below provides a full summary of all applying exchange-rate regimes for EU members, since the European Monetary System with its Exchange Rate Mechanism and the related new common currency ECU came into being on 13 March 1979. The euro