It also created the European Monetary Cooperation Fund (EMCF). However, in March 1979 the European Monetary System (EMS) was created, fixing exchange rates onto the European Currency Unit (ECU), an accounting currency, to stabilise exchange rates and counter inflation. The widespread currency floats and devaluations set back aspirations for European monetary union. In 1971, US President Richard Nixon removed the gold backing from the US dollar, causing a collapse in the Bretton Woods system that managed to affect all of the world's major currencies. An attempt to limit the fluctuations of European currencies, using a snake in the tunnel, failed. His report was published in October 1970 and recommended centralisation of the national macroeconomic policies entailing "the total and irreversible fixing of parity rates and the complete liberation of movements of capital." But he did not propose a single currency or central bank. The European Council tasked Pierre Werner, Prime Minister of Luxembourg, with finding a way to reduce currency exchange rate volatility. At this time memories of the Latin Monetary Union involving principally France, Italy, Belgium and Switzerland and which, for practical purposes, had disintegrated following the First World War, figured prominently in the minds of policy makers.Ī first attempt to create an economic and monetary union between the members of the European Economic Community (EEC) arrived with an initiative by the European Commission in 1969, which set out the need for "greater co-ordination of economic policies and monetary cooperation." This was followed up at a meeting of the European Council at The Hague in December 1969. For example, as earlier on as the League of Nations, Gustav Stresemann had enquired in 1929 for a European currency against the background of an increased economic division due to a number of new nation states in Europe after World War I.
The first ideas of an economic and monetary union in Europe were raised well before establishing the European Communities. Pierre Werner's report began the first moves towards monetary union
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