Exchange Rate Mechanism

World Encyclopedia | 2005 | 562 words | Copyright

Exchange Rate Mechanism (ERM) System for keeping the currencies of member states of the European Union (EU) stable, as part of the European Monetary System (EMS). The ERM worked well for a time, but currency speculation forced two currencies, the UK pound sterling and the Italian lira, to leave it in 1992, because they were unable to keep the value of their currencies above the minimum limit. The ERM was near collapse, and to save it several currencies were allowed to fluctuate by as much as 15% above or below their central rate. See also foreign exchange

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