The EMS not only provided exchange rate stability through the setting-up of formal fluctuation bands between currencies; it also organized a monetary solidarity between countries, by providing compulsory interventions and related financing facilities. BIS Review 63/1997  -3-  Although the very first years of the EMS were characterized by several currency realignments, due to insufficient nominal convergence between countries, the system progressively contributed to exchange rate stability. German monetary policy, based on stability and credibility, proved to be efficient. In this context, the French authorities fully endorsed the objectives and disciplines of the EMS and embarked on monetary and exchange rate stability. The years that followed were characterized by increasing convergence between countries and fewer realignments. All countries, including new participants in the system, adopted similar strategies. Although satisfactory in theory, this stance was nevertheless difficult to follow for some economies still facing imbalances, and in particular a lack of competitiveness. This explains partly the crises that occurred in 1992 and 1993. I cannot forget how efficient Franco-German cooperation was during this difficult period. This concrete cooperation has also been made possible by the emergence of a conceptual convergence as regards monetary issues. Since 1987, the central rate of the French franc within the European exchange rate mechanism (ERM) has been unchanged, and a virtuous disinflation process has been taking place. This policy has allowed French short-term and long-term interest rates to decline steadily and to stand at similar levels to those reached by the best performers within the EMS.

Indeed: - Franco-German monetary cooperation is based on solid foundations and has steadily developed during the last fifty years (1) - this cooperation will be crowned by the creation of monetary union in 1999 (2). FRANCO-GERMAN MONETARY COOPERATION IS BASED ON SOLID FOUNDATIONS AND HAS STEADILY DEVELOPED DURING THE LAST FIFTY YEARS In order not to bother you by an unduly long speech, I will focus on the last fifty years only! Nevertheless, one could easily demonstrate that our respective monetary histories have been deeply linked since the Middle Ages. Indeed, Emperor Charlemagne enacted a bill creating a unit of account common to its whole empire, which enshrined most of the present territories of France and Germany. The global features of the system (in particular the subdivisions) experienced an exceptional longevity of almost 1000 years. The last fifty years constitute, however, a rather homogeneous period, during which Franco-German monetary cooperation really developed. First, it is useful to underline the solid roots and foundations of this cooperation. These foundations paved the way for the emergence of a common destiny, which is best illustrated by the creation of the EMS. This community of views and interests have been crucial in the decision to create a European monetary union and a single currency. I will first explain the solid roots and foundations on which Franco-German monetary cooperation is based Franco-German monetary cooperation is based on historical and economic foundations. The historical roots of Franco-German monetary cooperation can easily be identified.