Setting conversion rates for the third stage of EMU

The work examines how the irrevocably fixed conversion rates for the currencies of countries participating in the EMU can be set. The authors recall the few provisions delineated in the Maastricht Treaty before examining the wide set of options available. If there are currencies in the ECU basket that do not participate to the single currency, setting conversion rates becomes more complicated. Moreover, the Lamfalussy rule for defining rates comports undesirable consequences. The authors conclude by proposing a multi-stage solution that is compatible with the recent Council regulation on the legal framework: announcement that the euro conversion rate will be set equal to the ECU market rate on the last day and a parallel agreement on the desired structure of bilateral rates of the inside countries.