The formal post-mortem on the events leading up to Black Wednesday says the exchange rate mechanism is not fatally flawed nor in need of structural reform.
Reports commissioned from the central bank governors and the EC monetary committee blame the near- collapse of the system in September 1992 on the tight monetary policy adopted by Germany to staunch the inflationary effect of reunification and the interest rate differences between the US and Europe.
The combined effect of weaker currencies when structural problems such as growing public deficits had gone too long unchecked is described as explosive.
The reports conclude that EC countries, particularly Germany, need a better policy mix and a better system of surveillance should be built into the system. Above all they suggest: 'It would be premature to manage the EMS as a de facto monetary union as long as the necessary degree of convergence has not been achieved'.
The currency turmoil of the past eight months has undermined this process and EC finance ministers confided this weekend it might now be hard to meet the timetable for monetary union.
It has proved not only economically difficult in recession but politically risky. Policymaking in Spain, Italy, Germany and France is dominated by electoral considerations.
Horst Kohler, the German economics minister, said yesterday he believed the calendar for monetary union - which must be preceded by economic convergence - could be lengthened as long as the convergence criteria remained unaltered.
Jacques Delors, president of the EC Commission, countered this view, saying it was psychologically important to keep to the timetable, which envisages union by 1997 at the earliest and 1999 at the latest.Reuse content