What is European Monetary System?

A system adopted by European Community members with the aim of promoting stability by limiting exchange-rate fluctuations. The system was originated in 1979 by the ninemembers of the European Community (EC). The EMS comprised three principal elements: the European Currency Unit(ECU), the monetary unit used in EC transactions; the Exchange Rate Mechanism, ERM,whereby those member states taking part agreed to maintain currency fluctuations withincertain agreed limits; and the European Monetary Cooperation Fund, which issues the ECU andoversees the ERM. The 1992 Maastricht Treaty provided for the move to Economic andMonetary Union (EMU), including a European Monetary Institute to coordinate the economic andmonetary policy of the EU, a European Central Bank (ECB) to govern these policies, and the presentation of a single European currency.European optionOption that may be exercised only at the expiration date. Related: American option.