The new European Monetary System (EMS), designed to align currencies and bolster monetary stability inside the Common Market will go into operation from the opening of European markets tomorrow.
The long-delayed move was announced here today at the start of an EEC summit meeting, whose agenda is dominated by problems of mounting European unemployment and pressure on world oil supplies and prices.
Besides putting the EEC back on the road to its goal of monetary union, European leaders have been anxious to put EMS in place because of fears here of possible renewed U.S. dollar instability due to uncertainty about oil supplies.
The EMS, formally adopted by the last European summit in December, only got off the ground in time for this one after a last-minute, vaguely worded compromise on phasing out Common Market farm price subsidies. France had objected that the old system favored West German farmers.
The architects of the EMS, French President Valery Giscard d'Estaing and West German Chancellor Helmut Schmidt, claim that the system will add 1 percent to the Common Market's growth rate by promoting trade among participating countries.
To create a zone of monetary stability and protect European currencies from swings in the U.S. dollar rate, the idea is to contain exchange-rate fluctuations within narrow limits (normally 4.5 percern) among the eight participating countries -- France, West Germany, Italy, Belgium, Luxemburg, Holland, Ireland and Denmark.
EMS members will pool 20 percent of their foreign reserves to create a $30 billion fund. Each country can draw on the reserve to keep its currency in line, enabling businessmen to count on stable exchange rates inside the Common Market. West Germans hope it will keep the mark from rising and the French hope it will keep up the franc.
The main focus of this summit, however, is current EEC economic problems. an EEC commission reported that this economic growth amounted to 2.8 percent for the EEC last year, and it predicted a rise to 3.4 percent in 1979. It predicts a combined EEC inflation rate of 5.5 percent.
But the commission said it was "unlikely" that even the slightly higher growth rate can "appreciably" cut unemployment, now running around 7 million in EEC countries and becoming a growing social and political preoccupation.
These forecasts, however, could be upset by fresh oil-price increases. An EEC report here said that each extra dollar per barrel of oil cost the EEC 0.3 percent added inflation and 0.4 percent growth.
The EEC summit plans to issue an energy-saving plan here tomorrow at the end of the two-day summit. Its effect will be similar to the 5 percent cur in demand recently adopted by the International Energy Agency, but the EEC does not mention this figure apparently out of deference to France, which alone among EEC countries is not an IEA member.