Is It the crisis to blame?

Abstract

The aim of this paper is to examine the European Monetary System (EMS) and its Exchange Rate Mechanism (ERM) regarded as the forerunner to European Monetary Union (EMU). It may contribute to understanding the nature and the operation of the monetary integration of the single currency area. The paper examines the reasons why the European Monetary System was formed in 1979, whether its crisis could have been avoided in the early 1990s and how the "new" ERM worked out. The ERM was succeeded by ERM 2 from 1999 in which the euro became the anchor for the other participating currencies. The global economic and financial crisis has brought both the structural and the operational weaknesses of EMU to the surface. The future of the European monetary integration is vital for Europe. The euro crisis is often perceived to have been caused by the global crisis. The ERM did not seem to have laid the groundwork for the monetary union and the Maastricht Treaty also has some critical points determining the operation of EMU in the long run. It is essential to gauge the euro-zone from the aspect of its vulnerability and susceptibility to crises to prevent a recurrence.