European Monetary System

Also known as: EMS

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Last updated

July 20, 2026

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The European Monetary System (EMS), established in 1979, was an agreement among most members of the European Economic Community (EEC) to manage their exchange rates. It aimed to create a more stable economic environment for trade within Europe, complementing the existing customs union.1

The EMS pegged member currencies to a European Currency Unit (ECU), which was a basket of several European currencies. This system allowed for greater flexibility in exchange rates compared to the earlier International Monetary Fund (IMF) system, with fluctuations of up to 6 percent permitted. The EMS also facilitated more frequent adjustments of official rates and operated independently of the U.S. dollar. The ECU was intended to eventually become a single currency for a unified Western European economy and was replaced by the euro in 1999.123

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Creation of the European Economic Community
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