ABSTRACT
When general floating began a year later there was no longer a tunnel in which to float. (For those who like these descriptive terms, the arrangement between Belgium and the Netherlands to keep the fluctuations between their currencies to the even narrower range of 1 ½ per cent was nicknamed the 'worm'.)
Before the snake, the EC countries had already undertaken a number of measures to ease adjustment between them. The first was for Shortterm Monetary Support, set up in 1970. This enabled debtor countries to draw for a period of up to three months on credits from the creditor countries up to a quota limit. This in effect created a mini-IMF arrangement particularly if a country wished to draw more than its quota. However, perhaps the best known antecedent was the much older European Payments Union, started in 1950, to treat European surpluses and deficits on a multilateral basis and thereby ease the limitations of liquidity on trade.
