EXCHANGE RATE MECHANISM II

The exchange rate arrangement which provides the framework for exchange rate policy cooperation between the euro area and EU Member States not participating in the euro area from the start of Stage Three of Economic and Monetary Union (EMU). Membership of the mechanism is voluntary. Nevertheless, Member States with a derogation are expected to join the mechanism. Foreign exchange intervention and financing at the margins of the standard or narrower fluctuation bands are, in principle, automatic and unlimited, with very short-term financing available. The ECB and the participating non-euro area national central banks could, however, suspend automatic intervention if this were to conflict with their primary objective of maintaining price stability.