Title: European Monetary System - Wikipedia
Headings: European Monetary System
European Monetary System
Contents
History
Background, 1960 to 1971
1972: the Werner Report is published and EEC countries peg their currencies
The EMS is created
Creation of the European Currency Unit
German monetary policy dominates
Changing operating principals and preparing for the Euro
1992 crisis
Criticism
See also
References
Further reading

Content: The European Single Market had been created in 1986 with the main goal of removing control on capital movements. Periodic adjustments raised the value of strong currencies and lowered those of weaker ones, and national interest rates were changed to keep the currencies within a narrow range. In early 1990, the European Monetary System was strained by the differing economic policies and conditions of its members, especially the newly reunified Germany, and Britain, which had initially declined to join, subsequently joining in 1990. The opt-out of Denmark from the EMU in 1992 and exchange rate adjustments of the currencies from weaker countries by the EMS also contributed to the crisis. Speculative attacks on the French franc during the following year led to the Brussels compromise in August 1993 which broadened the fluctuation band from +/-2.25% to +/-15% for all the participating currencies. The German central bank reduced interest rates and the UK and Italy were affected by large capital outflows. In the aftermath of the crisis, Italy and the UK both withdrew from the ERM in September 1992. Criticism
Michael J Artis (1987) assessed the credibility of the EMS, stating that the EMS had low credibility during the first eight years of its history. Artis also states that the system demonstrated its resilience despite working relatively non-smoothly. He also remarked that EMS was supposed to have improved the stability of the intra-EMS bilateral exchange rates but that the improvement was less marked for effective rates when compared to nominal rates and stability weakened with the passage of time.