Snake in the tunnel
The European exchange rate mechanism was a multilateral intervention system between European currencies and went back to the Agreement of Basel (April 10, 1972) ( Tags snake or serpent in the tunnel), in which the six Member States (as of 1 January 1973, nine countries; accession: Great Britain, Ireland, Denmark) had the then European Community initially agreed a bilateral intervention system of their currencies against the U.S. dollar. This was officially an agreement between the central banks of the Community Member States relating to the reduction of the fluctuation of their currencies ( in English: Basel Agreement of 10 April 1972, Implemented on 24 April 1972, in between the central banks of the Member States of the Community on the narrowing of the margins of fluctuation).
In February 1973, the U.S. dollar was devalued against gold by ten percent. At that time was the Bretton Woods system; it broke a few weeks together later. On this occasion, the European central banks set an intervention for their currencies against the USD, but held between some of their currencies through a mutual intervention system at fixed but adjustable exchange rates fixed. At this " European exchange rate mechanism " of central banks took after the Council of the European Communities declaration of 12 March 1973, first the following six currencies in part ( in the then official abbreviations and designations ): BFR - België / Belgique / Belgium, ITL - Italy, DM - Federal Republic of Germany, FF - France, LFR - Grand Duchy Luxemb ( o) urg, HFL - Nederland.
The desire for stable exchange rates within Europe prompted the EC countries to these steps. Until 1 January 1973, the EEC consisted only of their six founding countries; from 1 January 1973, joined the United Kingdom, Ireland and Denmark.
The peg to the U.S. dollar proved to be disadvantageous. Thus, from a " bilateral intervention system " against the U.S. dollar a " multilateral " intervention system between European currencies in the buy each participating central bank on its foreign exchange market when reaching the full bandwidth ( intervention rates ) either their currency with loans from other central banks or their Make your own currency ( sell ) had.
In the aftermath, other met, even a " non-Community currencies " such as the Norwegian krone (Norsk kroner ) to this " European exchange rate mechanism " to. Although were provided and depreciations of the currencies involved, showed numerous Währungsbei and outlets the weaknesses of the system.
Therefore, the EC governments decided in 1979, the introduction of the European Monetary System (EMS) as a successor to the " European Exchange Rate Mechanism ."