The creation of the so-called European Snake Monetary System in 1972 was a decisive step in paving the way for the coordination of national economic policies. The “Snake” in fact was for the establishment of a European Monetary Fund for the cooperation a first example of central banking body in Europe.
Despite the failure of the objectives of this project, due to the inability of some countries (including Italy) to maintain the predetermined fluctuation levels, the Monetary Snake set up another important milestone on the path to Euro: the European Monetary System, in 1978.
As the previous agreement, the European Monetary System had an equal fixed exchange rate with a fluctuation of 2.25%. Later, thanks to a negotiation with Giscard D’Estaign, (cooperating with H. Schmidt around this project) it was raised to 6%.
What must point out is that EMS is not considered only as an exchange rate agreement, but also as a social and political one. Certainly, it was a way to harmonize and “equalize” the economies of European countries, and this was useful in the following agreements on the European currency.
Countries such as Italy or Spain, in fact, had divergent inflation rates compared to other members and then with those agreements were intended to import credibility from economically stronger countries like Germany.
This underlines how strong the link between politics and economy was. As the economic agreements pushed political unity of states, the European policy used the monetary systems to coil Europe with a stronger sense of belonging.
Report of topics discussed during the conference: The History of the European Monetary Union. Comparing strategies to prospects of integration and national resistance ( Bank of Italy – Genoa)