Snake

Summary of Snake

A medium for the stabilization of the exchange rates of European currencies. In October 1970 the Werner Plan addressed the adoption of a common European currency as a vehicle for the full economic and political integration of Europe. The demise of the bretton woods agreement (read this and related legal terms for further details) system, following the abandonment of U.S. dollar convertibility into gold on August 15, 1971, gave rise to intense fluctuation of major trading currencies. In response to this condition, and with an objective of enhancing European integration, members of the European Economic Community held a meeting at Basel in April 1972 and devised the common margins arrangement, which came to be known as the snake in the tunnel, or simply the Snake. Original participants in the arrangement were Belgium, Federal Republic of Germany, France, Netherlands, Luxembourg, and Italy. In anticipation of their accession into the European Economic Community, Britain, Ireland, and Denmark joined the agreement on May 1, 1972; however, the pound sterling and Irish pound left the Snake on June 23, followed by the Danish krone four days later. Over the next six years, the Snake was troubled with the entry and exit of the Danish krone, French franc, Norwegian krone, Swedish krona, and various revaluations of the remaining currencies. The snake was dismembered with the advent of the European Monetary System (read this and related legal terms for further details) in March 1979.

(Main Author: William J. Miller)