The European System of Central Banks (ESCB) led by the European Central Bank (ECB) will become operational when Stage III of Emu begins on January 1 1999. Member countries will irrevocably lock exchange rates, and interbank payments in euros will begin. There will be respite from Stage II instabilities: bilateral currency markets will no longer exist to batter policy goals.
Is this respite permanent or only the eye of the storm? Could Stage III itself be subject to an attack that forced a realignment of the “irrevocably fixed” exchange rates and a break-up of the system? The received wisdom is: no.
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