Snake in the tunnel


Snake in the tunnel

The "snake in the tunnel" was the first attempt at European monetary cooperation in the 1970s, aiming at limiting fluctuations between different European currencies.

Pierre Werner presented a report on economic and monetary union to the European Economic Community on 8 October 1970. [ [http://ec.europa.eu/economy_finance/euro/origins/werner_en.pdf Werner report in OJEC] ] The first of three recommended steps involved the coordination of economic policies and a reduction in fluctuations between European currencies. [ [http://ec.europa.eu/economy_finance/euro/origins/origins_2_en.htm Origins of the Euro] ]

With the failure of the Bretton Woods system with the Nixon shock in 1971, the Smithsonian agreement set bands of ±2.25% for currencies to move relative to their central rate against the US dollar. This provided a "tunnel" in which European currencies to trade. However, it implied much larger bands in which they could move against each other: for example if currency A started at the bottom of its band it could appreciate by 4.5% against the dollar, while if currency B started at the top of its band it could depreciate by 4.5% against the dollar; if both happened simultaneously then currency A would appreciate by 9% against currency B. This was seen as excessive, and the Basle agreement in 1972 [European currency snake http://www.ena.lu/?doc=10098&lang=02] between the six existing EEC members and three about to join established a "snake in the tunnel" with bilateral margins between their currencies limited to 2.25%, implying a maximum change between any two currencies of 4.5%, and with all the currencies tending to move together against the dollar. [ [http://www.ucd.ie/economic/staff/rthom/road.ppt The Road to Monetary Union] ] This agreement also led to the formal end of the sterling area.

The "tunnel" collapsed in 1973 when the US dollar floated freely. The "snake" proved unsustainable, with several currencies leaving and in some cases rejoining. By 1977, it had become a Deutsche Mark zone with just the Belgian and Luxembourg franc, the Dutch guilder and the Danish krone tracking it. The Werner plan was abandoned. [ [http://www.europarl.europa.eu/factsheets/5_1_0_en.htm European Parliament: The historical development of monetary integration] ]

References


Wikimedia Foundation. 2010.

Look at other dictionaries:

  • Snake (disambiguation) — A snake is a common reptile of the order Squamata. See also serpent. NOTOC It may also refer to:Geography* Snake Creek, a tributary of the North Branch Susquehanna River in Pennsylvania in the United States * Also see Snake River for several… …   Wikipedia

  • The Desert Forges — Format Game show Created by Adventure Line Productions Presented by Richard Fairbrass Gabrielle Richens Starring Melanie Winiger …   Wikipedia

  • Snake — Ophidian redirects here. For the professional wrestler, see The Osirian Portal. This article is about the animal. For other uses, see Snake (disambiguation). Snakes Temporal range: Early Cretaceous – Recent, 112–0 Ma …   Wikipedia

  • The Great Escape (film) — Infobox Film name = The Great Escape image size = 225px caption = original movie poster by Frank McCarthy director = John Sturges writer = Book: Paul Brickhill Screenplay: James Clavell W.R. Burnett Walter Newman (uncredited) starring = Steve… …   Wikipedia

  • Tunnel valley — A tunnel valley is a deep but narrow valley with a U shaped cross section and frequently a U shaped plan which is usually found filled with glacial till. It is formed when the edge of an ice sheet advances up a slope. Its length may be… …   Wikipedia

  • The Spiderwick Chronicles — This article is about the novel series. For the feature film adaptation, see The Spiderwick Chronicles (film). The Spiderwick Chronicles Beyond the Spiderwick Chronicles Cover of The Spiderwick Chronicles Boxed Set, 2004 T …   Wikipedia

  • The Wind in the Willows — For other uses, see The Wind in the Willows (disambiguation). The Wind in the Willows   …   Wikipedia

  • The Serpent Trail — Infobox Hiking trail Name=The Serpent Trail Photo= Caption= Location=Hampshire, Surrey and West Sussex, England Designation= Length=convert|64|mi|abbr=on Start/End Points=Haslemere Petersfield Use=Hiking ElevChange= HighPoint=Blackdown 280 metres …   Wikipedia

  • The Final Scene — Infobox VG| title = Nancy Drew: The Final Scene developer = Her Interactive publisher = DreamCatcher designer = released = November 7, 2001 genre = Adventure modes = Single player ratings = ESRB: Everyone (E) platforms = Windows media =… …   Wikipedia

  • Snake coils (geology) — Snake coils is a descriptive term used by physical geologist and glaciologists to describe the snake coil like shape that occurs along certain ablation lines. Essentially miniature tunnel valleys, the peculiar natural shapes were first described… …   Wikipedia


Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.