The 1957 Treaty of Rome has little to say about money. This is because the post-war order for the market economies of Europe, North America and Japan was founded on the Bretton Woods system which provided the international framework for currency stability, with gold and the US dollar as the predominant monetary standards.
The authors of the Treaty of Rome therefore assumed that stable currencies would remain the norm, and that Europe’s construction could be securely based on achieving a customs union and common market allowing the free movement of goods, services, people and capital.
The Bretton Woods system had already begun to show signs of strain in the late 1950s, and by 1968-69, a new era of currency instability threatened when market turbulence forced a revaluation of the German mark and devaluation of the French franc. This endangered the stability of other currencies and the common price system of the common agricultural policy – which was, at that time, the main achievement of the European Community.
Against this troubling background, and with the customs union largely achieved, the Community was anxious to set itself new goals for political development during the next decade. The 1969 Barre Report, which proposed greater economic coordination, brought new impetus, and Economic and Monetary Union became a formal goal at a summit in The Hague in 1969. Europe’s leaders set up a High Level Group under the then Luxembourg Prime Minister Pierre Werner to report on how EMU could be achieved by 1980.
The Werner group submitted its final report in October 1970, setting out a three-stage process to achieve EMU within a ten-year period. The final objective would be the irreversible convertibility of currencies, free movement of capital, and the permanent locking of exchange rates – or possibly a single currency. To achieve this, the report called for closer economic policy coordination, with interest rates and management of reserves decided at Community level, as well as agreed frameworks for national budgetary policies.>> Phase 2: the European Monetary System