What is ERM?
ERM is an acronym which represents European Exchange Rate Mechanism. This system was introduced by the European Economic Community in March, 1979. Later ratified by the Treaty of Maastricht, it was designed to reduce the exchange rate variability between the currencies of participant members, in order to introduce a stable element as pt of the economic enforcement process of the European Monetary System (EMS) to establish Economic and Monetary Union (EMU). This single economic measure was referred to as the European Currency Unit (ECU), which became the Euro in January, 1999. Participation in the ERM required a currency stability margin of 2.25% delta from bilateral rates measured in ECUs (Italy was allowed a 6% margin). The British Pound Sterling entered into the ERM in 1990, but was forced to withdraw two years later due to escalating inflation falling outside of the 2.25% margin. The margin was increased to 15% in 1993 due, in part, to the failure of the British Pound and speculatio
