European countries are extremely dissatisfied with the existing monetary system's inability to provide for adequate international liquidity and stability in exchange rates. They consider interventions from the Smithsonian Agreement in 1971 to the Plaza Agreement in 1985 to have been short-lived and even fruitless attempts. Noting the relative success that the European Monetary System had in restoring stability to exchange rates within the European Economic Community, Europeans propose the implementation of a similar system on the global level. 1
The tangible accomplishment of the EMS has been the emergence of the European Currency Unit (ECU) as a very robust currency (see Figure 8.7). The "European solution" calls for development of a similar currency for the global market. A combination of the U.S. dollar, the ECU, and the Japanese yen, the DEY would serve as the currency to which the rest of the countries would peg their own national currencies. The advantage of this arrangement is that there would be no incentive for any of the three main countries to accumulate foreign currencies. Variations beyond an upper or a lower limit would automatically trigger corrective intervention.
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