European Monetary System

An exchange rate regime established in 1979 in accordance with the Resolution of the European Council of 5 December 1978. Its operating procedures were laid down by the Agreement of 13 March 1979 between the central banks of the Member States of the European Economic Community (EEC). The objective was to create closer monetary policy cooperation between Community countries, leading to a zone of monetary stability in Europe. The main components of the EMS were the ECU, the exchange rate and intervention mechanism (ERM) and various credit mechanisms. It ceased to exist at the start of Stage Three of Economic and Monetary Union (EMU), when ERM II (exchange rate mechanism II) was established.