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European Monetary System (E.M.S.)

This is a direct descendent of the snake and was set up in 1979 when the Snake began to show signs of crumbling. It is a voluntary system id represents another attempt to stabilize the exchange rates of E.E.C. members between themselves, leaving them free to float against the dollar. Rates of exchange of members of the E.M.S. are established in terms of the E .C. U. and those members are expected to keep within 2’/4 per cent of the designated rates. Members with serious economic problems may apply to a meeting of the E.E.C. finance ministers for their rate to be revised.

Debts between members are settled through the European Monetary Cooperation Fund. When the E.M.S. was established it was intended as a step towards a pan-European central bank a European monetary fund which would issue E.C.U.s against individual currencies.

Reference: The Penguin Business Dictionary, 3rd edt.