The relationship between the euro and the currencies of Member States outside the euro area 

With the start of the third stage of EMU on 1 January 1999, the European Monetary System was replaced by an exchange-rate mechanism to be known as ERM2, linking currencies of Member States outside the euro area to the euro. ERM 2 is based on central rates defined vis-à-vis the euro, reflecting both the anchor role of the euro and the goal of convergence to the euro area. The operating procedures of ERM 2 will be laid down in an agreement between the ECB and the national central banks of the Member States outside the euro area. Participation in ERM2 is on a voluntary basis, in accordance with the Treaty. Two currencies entered ERM 2 on 1 January 1999: the Greek drachma is participating within the standard fluctuation band of plus or minus 15% around its central rate against the euro and the Danish krone is participating within a narrow fluctuation band of plus or minus 2.25 %.