|European currency snake|
The countries of the European Economic Community agreed in 1972 to manage their currencies so that their exchange rates moved in relation to one another, and, within certain narrow bands, in relation to the dollar. It was considered that the management of the currencies of the Community in this way was the necessary first step to monetary union and, eventually, to the ideal of a common currency. The fluctuations in the rates of each currency were confined within a margin of± 2,25 per cent. In addition, the group as a whole was also managed in respect to the dollar, with fluctuations confined within a range of ± 4,45 per cent. Initially the arrangement was referred to as the 'snake in the tunnel'. After 1973, however, the 'snake' was left to float against the dollar, and the 'tunnel' has vanished. The countries in the 'snake' were, for varying periods of time, Belgium, Denmark, the Netherlands, West Germany, the United Kingdom, Italy, France and, outside the E.E.C. itself, Sweden and Norway. This method of managing European currencies was replaced in 1979 by the European Monetrary System.
|Reference: The Penguin Dictionary of Economics, 3rd edt.|