The West German Chancellor, Helmut Schmidt arrived in Italy on Wednesday (November 1) for talks with the country's Prime Minister, Giulio Andreotti, on the proposed European Monetary System, the EMS.
The West German Chancellor, Helmut Schmidt arrived in Italy on Wednesday (November 1) for talks with the country's Prime Minister, Giulio Andreotti, on the proposed European Monetary System, the EMS. It is part of a series of similar top level meetings due to take place between Common Market leaders before next month's European Economic Community Summit meeting -- when a decision on the plan is expected to be announced.
SYNOPSIS: The broad idea of the monetary system is that all the nine currencies should be tied to each other so that when any of them change value the movement will stay within set limits. This set limit would be a central rate, similar to that in the existing European joint float, the 'Snake'.
At the moment the value of the currencies fluctuates according to daily demands, which vary depending on how speculators view a currency's strength. Backers of the EMS hope it will produce a stable set of currencies in Western Europe which will protect the economies of the community from the effects of the violent and often unpredictable movements on the exchange markets. If it succeeds the system will be supported by a European Currency Unit, or ECU, that will remain a notional currency. The currency would be backed by a common fund consisting of gold and dollar reserves and members own currencies, totalling about 50,000 million dollars.
It has been the United States inability -- or unwillingness -- to halt the fall in value of the dollar that led, earlier in the year to West Germany's Chancellor Helmut Schmidt -- here meeting the United States Treasury Secretary Michael Blumenthal -- deciding to press ahead with the plan for the EMS. He has been supported in his plans by France's President Giscard D'Estaing.
Details of the proposed system were put to President Carter at the seven nation economic summit in Bonn in July. The President gave his support but Britain's Prime Minister James Callaghan and his Italian counterpart, Giulio Andreotti, both retain doubts about the system. Despite the objections, Chancellor Schmidt still wants to get the EMS off the ground.
Though the scheme does not go as far as having one currency for Europe, the new system is a small step towards its being, and will in theory make business transactions between members of the Common Market more efficient, because they will not have to worry so much about fluctuations in the exchange rates making their goods more or less expensive for their customers. Before the theory becomes practice though there are still a number of difficulties to be overcome, both political and practical.