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EXCHANGE RATE MECHANISM II (ERM II)

Statistics Directorate    
Definition:
Exchange Rate Mechanism II is the exchange rate arrangement which provides the framework for exchange rate policy co-operation between the euro area and EU Member States not participating in the euro area from the start of Stage Three of Economic and Monetary Union (EMU).

Context:
Membership of the mechanism is voluntary. Nevertheless, Member States with a derogation can be expected to join the mechanism. Currently, the Danish krone participates in ERM II with a fluctuation band around the central rate against the euro of ±2.25%. Prior to the adoption of the euro by Greece on 1 January 2001, the Greek drachma participated in ERM II with a fluctuation band of ±15%.

Foreign exchange intervention and financing at the margins of the standard or narrower fluctuation bands are, in principle, automatic and unlimited, with very short-term financing available. The European Central Bank (ECB) and the participating non-euro area national central banks could, however, suspend automatic intervention if this were to conflict with their primary objective of maintaining price stability.

Source Publication:
European Central Bank Annual Report.

Hyperlink:
http://www.ecb.europa.eu/pub/annual/html/index.en.html

Statistical Theme: Financial statistics - Exchange rates

Created on Tuesday, November 13, 2001

Last updated on Tuesday, June 11, 2013