European Monetary System is an organization of European nations that seek to stabilize their exchange rates. An exchange rate is the price of one nation's currency in terms of another's. Spain joined in 1989, the United Kingdom in 1990, Portugal in 1992, Austria in 1995, and Finland in 1996. In 1992, Britain and Italy announced a suspension of their participation in the system. Italy rejoined in 1996.
Exchange rates vary daily, depending on the supply of and demand for various currencies.
European Monetary System members have worked to encourage trade and investment by keeping exchange rates steady in relation to one another. The official value of each member's currency is defined in ECU's. As a result, each member's money also has an official price in terms of any other member's money. For example, suppose that the French franc were officially worth 1 ECU and the Spanish peseta were officially worth 2 ECU's. The official rate for the two currencies would then be defined as 2 francs to a peseta.