European Monetary System

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European Monetary System (EMS) System set up in 1979 to bring about monetary stability among the then nine members of the European Community (EC). The EMS had three main components: the European Currency Unit (ECU), a monetary unit weighted according to the size of each member state's economy and the value of its trade; the Exchange Rate Mechanism (ERM), where each member state agreed to keep their national currencies within set margins (initially either 2.25% or 6% above or below) of a central rate of exchange against the ECU; and the credit mechanisms. The Maastricht Treaty (1992) set a timetable for achieving economic and monetary union (EMU) and the establishment of a single currency (the euro). In 1998, 11 member states chose to participate in the first stage of EMU. On January 1, 1999, the euro was born and a European Central Bank gained control of a single monetary policy.

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European Monetary System