1. Presented by: Seamus Burke
G00301820
05/11/2015

2. Introduction
 What is the EMS
 Setting up the EMS
 Ireland Pre EMS
Main Body
 Reasons that lead to Ireland joining the EMS
Conclusion
 Overview of presentation

3. What was the
European Monetary
System in 1979?
A system adopted by European
Community members with the aim of
promoting stability by limiting
exchange-rate fluctuations.
Set up following an initiative by the
EU President Roy Jenkins in 1978
Belgium
Denmark
France
Federal Republic of
Germany
Greece
Ireland
Italy
Luxembourg
The Netherlands
United Kingdom
The United
Kingdom is a
member of the
EMS, but does
not participate
in the
intervention
arrangements.

4.  At the Copenhagen Summit, on 7 and 8 April 1978, Valéry
Giscard d'Estaing and Helmut Schmidt revived the idea of a
new European Monetary System (EMS), open to all the EEC
Member States.
 the Bremen European Council endorsed the principle of the
EMS on 7 July 1978. The EEC institutions and the Finance
Ministers of the nine Member States were immediately
instructed to draw up detailed proposals that were later
adopted formally by the Brussels European Council on 5 and
6 December 1978.
 On 13 March 1979, the EMS was born. The United Kingdom
did not join the EMS exchange rate mechanism so as to allow
the pound sterling to continue to float.
The formation of the European monetary
system

5. The men behind European Monetary System
Helmut Schmidt Valéry Giscard d'Estaing
Roy Jenkins

6. IRELAND PRE EUROPEAN
MONASTERY SYSTEM
(STERLING LINK)For over half a century after Independence, Ireland maintained a one-to-one currency peg with
sterling.
• By the end of 1978 Ireland was the only former sterling area country to have maintained an
unchanged parity since independence.
• The Irish economy imported the UK`S high and volatile inflation rate.
• The majority of Irelands exports and imports were to and from the UK.
• Sterling took an alarming slide against the US dollar.

8. • Currency link had been the centre of financial
strength no longer provided financial stability
• A perception that the long-period of relative
economic decline for the UK would continue and
would augur poorly for an economy too closely
linked with it.

10. 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.

11. Either you were in the ERM maintaining agreed parities and therefore
anchored to German monetary policy and closing in on its low inflation
rate: or you applied a different set of monetary policy priorities, your
currency depreciated, inflationary pressures accumulated and you left
the ERM (Mulhearn and Vane 2008, pp.37).
Note: Low inflation did not follow in the short term ( Leddin and walsh
2013)

12. Margins of
fluctuations
+2.25%
-2.25%
Central Rate
Cant go below -2.25%
• Each EC currency was allowed to fluctuate
within a margin of 2.25 percent around the
central rate. A few exceptions to this general
rule were Italy, the United Kingdom, and
Spain, which were each allowed a larger
margin of plus or minus 6 percent (Hamvi
and Niroomand, 1995).

13. o It was decided to join the EMS in
order to anchor the pound to the
German mark. From this, it was
envisaged that by tracking the
German currency, the economic
fundamentals enjoyed by Germany
such as low inflation could also be
tracked by the Irish economy.
o Previous fundamental disasters
affecting the UK, such as high
inflation; high interest rates; and
most importantly, an unstable
currency, had pointed to the
advantages of adopting closer ties
with the more stable German
economy.
Ireland's inflation performance during the
EMS period was therefore mixed, starting
badly and finishing positively. (Kenny and
McGettigan's study 1996)

14. • Fianna Fail lead Government
• Underlying Issues with the UK
• Republican views.
• Didn’t want to be associated with the UK

16. CONCLUSIONS
Main points
EMS set up in 1979 to
steady inflation with aim of
promoting stability by limiting
exchange-rate fluctuations.
Ireland before the
EMS was part of the
“Sterling link”
Part of the UK
Decision To join the
EMS
• Exchange rate
mechanism
• Polictical
Low inflation did not
follow in the short
term

18. BIBLIOGRAPHY:
http://www.tara.tcd.ie/xmlui/bitstream/handle/2262/1477/jssisiVolXXIX_83
115.pdf?sequence=1

19. References
Anon, (2015). [online] Available at: https://www.centralbank.ie/paycurr/notescoin/history/Documents/spring8.pdf [Accessed 1 Nov. 2015].
Google Books, (2015). The Irish Economy?past, Present, and Future. [online] Available at:
https://books.google.ie/books?id=wKM51_AMAkkC&pg=PA55&lpg=PA55&dq=why+ireland+joined+the+ems+in+1979&source=bl&ots=vhHzhZZV1c&sig=YMrvW_owxnc7oRjk3FKvyXLt
CwE&hl=en&sa=X&ved=0CEEQ6AEwBGoVChMIwYiWzar-xwIVg88UCh2WCwI1#v=onepage&q=why%20ireland%20joined%20the%20ems%20in%201979&f=false [Accessed 5 Nov.
2015].
Honohan, P. (2010). Euro Membership and Bank Stability – Friends or Foes? Lessons from Ireland. Comp Econ Stud, 52(2), pp.133-157.
Leddin, A. and Walsh, B. (2013). Macroeconomics. Dublin: Gill & Macmillan.
Tara.tcd.ie, (2015). [online] Available at: http://www.tara.tcd.ie/xmlui/bitstream/handle/2262/1477/jssisiVolXXIX_83115.pdf?sequence=1 [Accessed 8 Oct. 2015].