ABSTRACT
There is a close relationship between the exchange rate and the financial systems of the European market economies. In the early 1990s, it seemed that the link between the European Union’s (EU) European Monetary System (EMS) and the movement to European Monetary Union (EMU) was inevitable. The member states adopted a strategy at the December 1991 Intergovernmental Conference (IGC) at Maastricht which was designed to move the EU towards a single currency by 1999. This was then incorporated into the treaties via the Treaty on European Union (TEU). Whilst EMU proved to be highly controversial for some of the member states, it was a strategy which was embraced by the Nordic applicants. They had shadowed the Exchange Rate Mechanism (ERM) of the EMS for a period prior to entry to the EU, and gained early experience of the problems of trying to cope with the process of monetary integration.
