CHAPTER FIVE - Exchange Rate Concertation: First Faltering Steps

Abstract

This chapter discusses the first faltering steps for exchange rate concertation. The decisions made by the Council at its session of 22 March 1971, which formally launched the economic and monetary union (EMU) project, not only committed the member states to the creation of an economic and monetary union by the end of the decade but also specified the actions that were to be taken during the first stage. The Six were to advance towards the final objective on four fronts. First, exchange rate stability within the community was to be promoted by reducing the size of fluctuations about parity. Second, the coordination of economic policies was to be fostered by intensifying the consultation procedures. Third, structural differences among the six economies were to be reduced by introducing community policies. Fourth, the movement of goods, services and the factors of production were to be liberalized by a series of measures in the tax and securities fields. Progress on each of these fronts was interdependent— economically, because the degree of success in harmonizing economic trends among the six countries would have an effect on the feasibility of exchange rate concertation, and politically, because proceeding on the basis of ‘parallelism’ meant that a step in the ‘monetarist’ direction had to be balanced by a corresponding advance along the ‘economist’ route.