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The European Exchange Rate Mechanism (ERM II) is an agreement between states aimed at supporting the stability and
coordination of the exchange rate policy in Europe.
The legal basis for ERM II is the Treaty on the European Union, particularly its articles 138 and 140, and the
Decision of the European Council of June 16, 1997.
With this decision, the European Council laid down political guidelines for the formation of ERM II in the third
stage of the Economic and Monetary Union.
Estonia joined ERM II on June 28, 2004.Joining it is a stage in Estonia’s process toward adopting the euro.The
ERM forms a framework based on which, as a result of multilateral negotiations (Member States, the European Central
Bank, European Commission, applicant country), the currency exchange rate of the country that wishes to adopt the euro
is pegged to the euro.During ERM II participation, every country that wants to join the euro area has to maintain its
national currency stable vis-à-vis the euro (the standard fluctuation range of the determined central exchange
rate in ERM II is ±15%)and meet the Maastricht criteria.Every country wishing to adopt the euro must participate
in ERM II for at least two years, whereas the length of that period depends on the country’s success in
fulfilling the Maastricht criteria.
By joining ERM II, Estonia made a unilateral commitment to keep the exchange rate unchanged and, thus, does not use
the allowed fluctuation range.Estonia will continue to use the currency board system until the adoption of the euro and
will apply the exchange rate of 1 EUR = 15.6466 EEK.
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