Between 1982 and 1986, the weaker European currencies were devalued substantially in a number of realignments. At the same time, consumer prices and unit labor costs in the countries concerned rose above average, making for a decline in the real effective exchange rate by only 1½ percent p.a., while the latter increased by the same amount in the hard-currency countries. Although exports and investment in the countries of weaker currency were stimulated by these devaluations, GDP of the EU as a whole expanded by hardly 2 percent p.a. over the period 1981-1987. From 1987 to 1992 when exchange rates remained stable inflation differentials between soft- and hard-currency countries abated gradually, while trend GDP growth in the EU accelerated to almost 3 percent p.a. Stable framework conditions for intra-EU trade have been largely responsible for this outcome. Between September 1992 and August 1993 the EMS de facto collapsed, mainly due to the fact that the policy of high interest rates pursued by the Bundesbank was oriented towards developments in Germany, while disregarding the need for lower interest rates in EMS partner countries, particularly in the U.K. Unlike in earlier phases of exchange rate instability unit labor costs since 1992 have not advanced by more than in the hard-currency block, resulting in a large shift in price competitiveness: between 1992 and 1995, the real effective exchange rate of the hard-currency area rose by an average 3 percent p.a. while that of the other EU countries fell by 6 percent p.a. Over the same period, total exports of the soft-currency area increased by an annual 9 percent, those of the hard-currency block by only 3 percent. Growth of real economic activity in the EU as a whole has been dampened by exchange rate instability: between 1992 and 1995, real GDP advanced 1½ percent p.a., only half the amount of the 1987-1992 period. Expansion of intra-EU trade, too, has been slower in the latter period – despite the establishment of the single market – than during the period of stable exchange rates.