Interrelation between European Currencies ERMII Katerina Manova, Zornitsa Angelova

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Interrelation between European Currencies
(ERMII) Katerina Manova, Zornitsa
Angelova
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The Snake

• Created 1972
• Exchange rate fluctuation margins of the main
  European currencies to /-2.25  around a central
  rate
• Collapse in 1974

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(No Transcript)
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European Monetary System

• Established in 1978
• Foundations ECU and ERM
• /-2.25 fluctuation band around the central rate
  fixed to the ECU
• Foreign reserves intervention

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ERMII

• Came in force 1999
• For EU non euro area member states
• Currencies fixed to euro and allowed /-15
  fluctuations
• Decisions taken by Governing Council of ECB plus
  ministers and governors of national non euro area
  central banks
• Interventions at the margin and intra-marginal
  interventions

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ERMII cont.

• Creation of very short term credit facilities
• Not binding but necessary participation
• Created to facilitate trade in the Single
  European Market
• Stability and easier convergence

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• Countries that have joined ERM II
• Countries that have not met the criteria for ERM
  II

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• Slovenia

0.10 1.00 2.00
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• Malta

0.10 1.00 2.00
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• Bulgaria

On the waiting list
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• 
  Romania