The transition to EMU proposed in the Maastricht Treaty and discussed in Chapter 6 was based on the belief that there could be a “seamless” path to monetary union. Inflation rates and long-term interest rates could be made to converge gradually; budget deficits and debt ratios could be made to conform to the requirements of the treaty; and exchange rates could be kept within the “normal” EMS band without “severe tensions.” Realignments were not ruled out, but they should take place only in “exceptional” circumstances (Delors Report, 1989). There had been several realignments within the EMS, but the last one had occurred in January 1987, five years before the signing of the Maastricht Treaty.

There were reasons to question the plausibility of this scenario, even when it was widely accepted; some of them were cited in Chapter 6. But the reasons began to multiply shortly after the treaty was signed. On June 2, 1992, Danish voters rejected the treaty in a national referendum, and critics of the treaty were growing more vocal in Britain. In August, tensions began to develop in the EMS, focused chiefly on the lira, and they intensified early in September, when public opinion polls began to suggest that French voters might also reject the treaty in a referendum on September 20. That did not happen, although the vote was very close. Before the outcome was known, however, the lira and pound had been withdrawn from the exchange rate mechanism of the EMS, the peseta had been devalued, and other EMS currencies had come under attack.