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The second attempt to create EMU (1979)

 The European Monetary System and the ECU

Confronted with an increasing number of European currencies which had left the "European system of limited fluctuation margins" (Agreement of Basel ) and started to float – the Italian Lira (LIT) already in 1973, the French Franc (FF) in 1974 and, after re-integration in 1975, again in 1976, the Swedish Kronar (SKR) in 1977 and the Norwegian Kroner (NKR) in 1978) – a second attempt to move towards EMU was made in 1979 with the establishing of the European Monetary System (EMS), intended to set up a zone of monetary stability and to increase efforts to achieve closer economic convergence between Member States.

The reasoning was simple: the floating exchange rates of most currencies of the European Communities (EC) had had a negative impact on internal cohesion and investment as well as on trade among the EC countries and between them and their major trading partners.

Both the second oil crisis and the political priority of making the internal market function better (especially competition and fiscal aspects, see also speech of the Commission's President, Roy Jenkins, of 27 October 1977 in Firenze) led to more emphasis being put on an ambitious Single Market programme and less on the immediate creation of a monetary union.

 

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