chapter  1
Introduction to the Dollar and the Euro
ByPedro Gomis-Porqueras
Pages 8

The rst seeds of the euro can be traced back to the Treaty of Rome in 1958, establishing the European Economic Community. At this time, the monetary exchange rate between countries was controlled by the Bretton Woods system, which connected all currencies to the US dollar, allowing for only a one point uctuation around previously designated values. This system worked well for twenty years, helping to stabilize exchange rates and restore economic growth in the postwar period. By 1960, however, the system began to fail, and exchange-rate agreements became the prevalent topic among European political and economic leaders.