The European Monetary System is a joint currency area made up of countries which have not abandoned independent fiscal and monetary policies. This article discusses how it has survived the difficulties normally expected for such an arrangement, in its first three and a half years. The EMS is in modified form a continuation of the joint exchange rate management in which various members of the EC have participated since 1970. The first section summarises the previous experience and attempts to explain why the EMS was introduced, how it was to differ from the earlier arrangements, and what its purposes were. These were a mixture of fairly precise economic targets, longer term economic objectives, and a more diffuse set of beliefs about how the EC should develop and how technical cooperation can contribute to more fundamental agreement. The second section analyses how, on the one hand, the existing characteristics of the present members' economies, and particularly of trade among them, and, on the other, their economic conditions and policies in this period have contributed to the survival of the EMS. The third section examines the performance of the member countries against the specific original goals and finds achievements in the first group of targets, the most short-term; little evidence so far of progress in the second; but perhaps some success in the third, although the nature of these objectives makes judgement difficult.