is that institutional arrangements privileged pro-EMS voices in France and Italy, butnot Britain.This research contradicts a largely settled literature which assumes the relevance of economic issues and historical/cultural attributes in the formation of national prefer-ences. It overlooks ideological competition within states on matters of internationaleconomic competition and the similarities across states in the positions of ideologically-compatible parties. Moreover, the approach taken here is potentiallygeneralizable beyond these three states, beyond currency cooperation, and beyond purely contemporary issues. For example, the alliance of far left and far right to in-ternational economic cooperation has been illustrated in the United States (NAFTA),Denmark (membership of the single currency), and Britain (over continued EECmembership in 1975).
Establishing the EMS
Helmut Schmidt proposed the EMS in April, 1978, persuading French PresidentValéry Giscard d’Estaing to support the initiative but failing to gain the support of British prime minister James Callaghan.
Schmidt’s motivations were several, but pri-marily it was an effort to redress the effects of an appreciation of the DM due to theweakness of the dollar (on the creation of the EMS and the motivations of the various players see Ludlow, 1982; McNamara, 1998; Goodman, 1992; Kruse, 1980; Morav-csik, 1998: 251ff; Story, 1988; Walsh, 1994). The idea was that by tying other Eu-ropean currencies to the DM, Germany would spread the cost of a weak dollar, and itwould also provide a more stable environment for intra-European trade and invest-ment.A fixed exchange rate system had advantages for highly interdependent economiessuch as those of western Europe, whether they were weak currency or strong currencycountries. Fixed nominal exchange rates would bring greater transparency to inter-national economic transactions and reduce competitive devaluations. However, there
1All member states of the European Community were eligible to participate in the EMS.2The EMS was preceded by another currency stabilization arrangement, the Snake. See Ludlow,1982. Schmidt’s proposal had an immediate antecedent in a speech by then Commission presidentRoy Jenkins in October, 1977.