In 1984 it was agreed that the United Kingdom would receive a partial rebate of its annual net contributions to the EC, beginning with a rebate of US$800 million for that year.
Greece entered the EC in 1981 and, after eight years of negotiations, Spain and Portugal joined in 1986. Other important developments during the 1970s and 1980s included the expansion of EC aid to less developed countries (especially to former colonial possessions of the member states); the institution of the European Monetary System to provide some stability in the relationships among member currencies; and progress towards removing internal trade barriers and establishing a single market.

European Monetary System

In March 1979 the European Monetary System (EMS) was established as a first step towards achieving an economic and monetary union. Initial plans to reach complete EMU by 1980 proved overly optimistic; currencies of member states fluctuated against each other, and the devaluation of some currencies limited economic growth and led to high inflation. The EMS was proposed to stabilize exchange rates and curb inflation by limiting the margin of fluctuation for each member currency to a small deviation from a central rate. A common European Currency Unit (ECU) was introduced by which the central exchange rates could be set. The ECU was comprised of all the EU currencies, weighted according to the economic importance of each country. When any currency reached the limit of the margin of fluctuation, set at 2.25 per cent, the central banks of the respective countries were obliged to intervene by selling off the stronger currency and buying the weaker one. The EMS also required member governments to take appropriate economic policy steps to prevent continued deviation from the central rate. The EMS helped lower inflation rates in the EC and eased the economic shock of global currency fluctuations during the 1980s. However, its principal mechanism, the Exchange Rate Mechanism (ERM), collapsed in September 1992 under sustained attack by currency speculators, triggered by high German interest rates following reunification. Italy and the United Kingdom were forced out of the ERM.

Towards a Single Market

The most significant development in the EC during the 1980s was the progress towards implementing a single European market. The campaign for the single market was led by Jacques Delors, a former French finance minister who became president of the European Commission in 1985. At a summit meeting in Milan, Italy, the commission proposed a seven-year timetable for removing nearly all the remaining trade barriers between member states.