European Monetary System (EMS)

A system adopted by European Community members with the aim of promoting stability by limiting exchange-rate fluctuations. The system was originated in 1979 by the nine members of the European Community (EC). The EMS comprised three principal elements: the European Currency Unit (ECU), the monetary unit used in EC transactions; the Exchange Rate Mechanism, ERM, whereby those member states taking part agreed to maintain currency fluctuations within certain agreed limits; and the European Monetary Cooperation Fund, which issues the ECU and oversees the ERM. The 1992 Maastricht Treaty provided for the move to Economic and Monetary Union (EMU), including a European Monetary Institute to coordinate the economic and monetary policy of the EU, a European Central Bank (ECB) to govern these policies, and the presentation of a single European currency.