n Economics, 1998). In 1979, the European Monetary System (EMS) was established to foster a greater stability between member state’s currencies and stronger coordination and convergence of economic policies (Europa Quest (1), 2001). The EMS consisted of four main components, the European Currency Unit (ECU), The Exchange Rate Mechanism (ERM), The Financial Support Mechanism (FSM) and the European Monetary Cooperation Fund (EMCF) (Harris, 1999: 80). The ERM was at the ‘heart’ of the EMS and provided for “fixed but adjustable” exchange rates between countries, whereby currencies could move within certain margins or fluctuations. When limits were breached the responsible authorities were required to impose appropriate policy measures (Europa Quest (1), 2001). The EMS enjoyed considerable success during the 1980s, lowering inflation rates in the EC and easing the adverse financial effects of the global exchange rate fluctuations (Chulalongkorn University, 1999). The most problematic aspect of the EMS was that it held no true sovereignty over member states, rather these countries still maintained autonomy over currencies and macro-economic policies (Harris, 1999; 80). To rectify this systems inadequacy, Jacques Delors, the President of the European Commission, issued the Cockfield Report, which sought to define the current status of the European markets and establish the correct means for implementing a monetary union (Chulalongkorn University, 1999). Delors identified the greatest challenges facing the EC, which were;1. The elimination of non-tariff barriers had not been achieved as specified under the Treaty of Rome. Instead, EC member states had begun to utilize such measures as Value Added Taxes (VAT), environmental laws, subsidies and difficult technical standards to circumvent established guidelines and protect domestic industry.2. The growing dominance of the US and Japan, required Europe to economically ...
