The European Exchange Rate Mechanism (ERM) was a system introduced by the European Community in March 1979, as part of the European Monetary System (EMS), to reduce exchange rate variability and achieve monetary stability in Europe, in preparation for Economic and Monetary Union and the introduction of a single currency, the euro, which took place on 1 January 1999.
After the adoption of the euro, policy changed to linking currencies of countries outside the Eurozone to the euro (having the common currency as a central point). The goal was to improve stability of those currencies, as well as to gain an evaluation mechanism for potential Eurozone members. This mechanism is known as ERM2.
Read more about European Exchange Rate Mechanism: Intent and Operation of The ERM, Irish Pound Breaks Parity With Pound Sterling, Pound Sterling's Forced Withdrawal From The ERM, Increase of Margins, Replacement With The Euro and ERM II, Current Status of The ERM II, Exchange Rate Bands
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