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The snake in the tunnel was a system of European monetary cooperation in the 1970s which aimed at limiting fluctuations between different European currencies. It was the first attempt at European monetary cooperation. It attempted to create a single currency band for the European Economic Community (EEC), essentially pegging all the EEC currencies to one another.
The metaphorical name is explained in a European Parliament briefing:
On 24 April 1972, EEC central-bank governors concluded the 'Basel Agreement', creating a mechanism called the ‘Snake in the tunnel’. Under this mechanism, Member States' currencies could fluctuate (like a snake) within narrow limits against the dollar (the tunnel) and central banks could buy and sell European currencies, provided that they remained within the fluctuation margin of 2.25%.[1]
The Werner Report has a graph that resembles a snake in a tunnel on p.43, but does not use that expression.[2]
The "tunnel" collapsed in 1973 when the US dollar floated freely. The "snake" proved unsustainable, with several currencies leaving and in some cases rejoining; the French franc left in 1974, rejoined, and left again in 1976 despite appreciating against the US dollar. By 1977, it had become a Deutsche Mark zone with just the Belgian and Luxembourg franc, the Dutch guilder and the Danish krone tracking it. The Werner plan was abandoned.[3] The European Monetary System followed the "snake" as a system for monetary coordination in the EEC.
- ^ Delivorias, Angelos (March 2015). "A history of European monetary integration" (PDF). European Parliamentary Research Service. p. 3. Retrieved 23 November 2024.
- ^ Werner, Pierre (8 October 1970). "Report to the Council and the Commission on the realisation by stages of Economic and Monetary Union in the Community" (PDF). Council Commission of the European Communities. p. 43. Retrieved 23 November 2024.
- ^ Cite error: The named reference
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