European Currency Unit
Encyclopedia
The European Currency Unit (₠ or ECU: eky, eɪˈkjuː or spelt out ˌiːˌsiːˈjuː) was a basket of the currencies of the European Community member states, used as the unit of account
of the European Community before being replaced by the euro
on 1 January 1999, at parity. The ECU itself replaced the European Unit of Account
, also at parity, on 13 March 1979. The European Exchange Rate Mechanism
attempted to minimize fluctuations between member state currencies and the ECU. The ECU was also used in some international financial transactions, where its advantage was that securities denominated in ECUs provided investors with the opportunity for foreign diversification without reliance on the currency of a single country.
The ECU was conceived on 13 March 1979 as an internal accounting unit. It had the ISO 4217 currency code
XEU.
) replaced the ECU, at the value €1 = 1 ECU. Unlike the ECU, the euro is a real currency, although not all member states participate (for details on Euro membership see Eurozone
). Two of the countries in the ECU basket of currencies, UK and Denmark
, did not join the eurozone, and a third, Greece
, joined late. On the other hand, Finland
and Austria
joined the Eurozone from the beginning although their currencies were not part of the ECU basket (since they had joined the EU in 1995, two years after the ECU composition was "frozen").
legislation to that effect. However, for abundant caution, several foreign jurisdictions adopted legislation to ensure a smooth transition. Of particular importance here were the USA states of Illinois
and New York, under whose laws a large proportion of international financial contracts are made. Both these states passed legislation to ensure that the euro was recognized as successor to the ECU.
is also the name of an ancient French coin. That was one (perhaps the main) reason that a new name was devised for its successor currency, euro, which was felt not to favour any single language.
+20A0), comprises an interlaced C and E, which are the initial letters of the phrase 'European Community' in many European languages. However, this symbol was not widely used: few systems at the time could render it and in any case banks preferred (as with all currencies) to use the ISO code XEU.
Unit of account
A unit of account is a standard monetary unit of measurement of value/cost of goods, services, or assets. It is one of three well-known functions of money. It lends meaning to profits, losses, liability, or assets....
of the European Community before being replaced by the euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
on 1 January 1999, at parity. The ECU itself replaced the European Unit of Account
European Unit of Account
The European Unit of Account was a unit of account used in the European Communities from 1975 to 1979, when it was replaced at parity by the European Currency Unit, in turn replaced at parity in 1999 by the euro....
, also at parity, on 13 March 1979. The European Exchange Rate Mechanism
European Exchange Rate Mechanism
The European Exchange Rate Mechanism, ERM, was a system introduced by the European Community in March 1979, as part of the European Monetary System , to reduce exchange rate variability and achieve monetary stability in Europe, in preparation for Economic and Monetary Union and the introduction of...
attempted to minimize fluctuations between member state currencies and the ECU. The ECU was also used in some international financial transactions, where its advantage was that securities denominated in ECUs provided investors with the opportunity for foreign diversification without reliance on the currency of a single country.
The ECU was conceived on 13 March 1979 as an internal accounting unit. It had the ISO 4217 currency code
ISO 4217
ISO 4217 is a standard published by the International Standards Organization, which delineates currency designators, country codes , and references to minor units in three tables:* Table A.1 – Current currency & funds code list...
XEU.
Euro replaces ECU
On 1 January 1999, the euro (with the code EUR and symbol €Euro sign
The euro sign is the currency sign used for the euro, the official currency of the Eurozone in the European Union . The design was presented to the public by the European Commission on 12 December 1996. The international three-letter code for the euro is EUR...
) replaced the ECU, at the value €1 = 1 ECU. Unlike the ECU, the euro is a real currency, although not all member states participate (for details on Euro membership see Eurozone
Eurozone
The eurozone , officially called the euro area, is an economic and monetary union of seventeen European Union member states that have adopted the euro as their common currency and sole legal tender...
). Two of the countries in the ECU basket of currencies, UK and Denmark
Denmark
Denmark is a Scandinavian country in Northern Europe. The countries of Denmark and Greenland, as well as the Faroe Islands, constitute the Kingdom of Denmark . It is the southernmost of the Nordic countries, southwest of Sweden and south of Norway, and bordered to the south by Germany. Denmark...
, did not join the eurozone, and a third, Greece
Greece
Greece , officially the Hellenic Republic , and historically Hellas or the Republic of Greece in English, is a country in southeastern Europe....
, joined late. On the other hand, Finland
Finland
Finland , officially the Republic of Finland, is a Nordic country situated in the Fennoscandian region of Northern Europe. It is bordered by Sweden in the west, Norway in the north and Russia in the east, while Estonia lies to its south across the Gulf of Finland.Around 5.4 million people reside...
and Austria
Austria
Austria , officially the Republic of Austria , is a landlocked country of roughly 8.4 million people in Central Europe. It is bordered by the Czech Republic and Germany to the north, Slovakia and Hungary to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the...
joined the Eurozone from the beginning although their currencies were not part of the ECU basket (since they had joined the EU in 1995, two years after the ECU composition was "frozen").
Legal implications
Due to the ECU being used in some international financial transactions, there was a concern that foreign courts might not recognize the euro as the legal successor to the ECU. This was unlikely to be a problem, since it is a generally accepted principle of private international law that states determine their currencies, and that therefore states would accept the European UnionEuropean Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
legislation to that effect. However, for abundant caution, several foreign jurisdictions adopted legislation to ensure a smooth transition. Of particular importance here were the USA states of Illinois
Illinois
Illinois is the fifth-most populous state of the United States of America, and is often noted for being a microcosm of the entire country. With Chicago in the northeast, small industrial cities and great agricultural productivity in central and northern Illinois, and natural resources like coal,...
and New York, under whose laws a large proportion of international financial contracts are made. Both these states passed legislation to ensure that the euro was recognized as successor to the ECU.
Etymology
Although the acronym ECU is formed from English words, écuÉcu (coin)
The term écu may refer to one of several French coins. The first écu was a gold coin minted during the reign of Louis IX of France, in 1266. Ecu means shield, and the coin was so called because its design included a shield bearing a coat of arms. The word is related to scudo and escudo...
is also the name of an ancient French coin. That was one (perhaps the main) reason that a new name was devised for its successor currency, euro, which was felt not to favour any single language.
Symbol
The currency's symbol, ₠ (UUnicode
Unicode is a computing industry standard for the consistent encoding, representation and handling of text expressed in most of the world's writing systems...
+20A0), comprises an interlaced C and E, which are the initial letters of the phrase 'European Community' in many European languages. However, this symbol was not widely used: few systems at the time could render it and in any case banks preferred (as with all currencies) to use the ISO code XEU.
Value determined by basket of currencies
| Currency | 13.03.1979– 16.09.1984 |
17.09.1984– 21.09.1989 |
21.09.1989– 31.12.1998 |
|---|---|---|---|
| BEF Belgian franc The franc was the currency of Belgium until 2002 when the euro was introduced into circulation. It was subdivided into centimes , 100 centiem or Centime .-History:... |
9.64% | 8.57% | 8.18% |
| DEM German mark The Deutsche Mark |mark]], abbreviated "DM") was the official currency of West Germany and Germany until the adoption of the euro in 2002. It is commonly called the "Deutschmark" in English but not in German. Germans often say "Mark" or "D-Mark"... |
32.98% | 32.08% | 31.96% |
| DKK Danish krone The krone is the official currency of the Kingdom of Denmark consisting of Denmark, the Faroe Islands and Greenland. It is subdivided into 100 øre... |
3.06% | 2.69% | 2.65% |
| ESP Spanish peseta The peseta was the currency of Spain between 1869 and 2002. Along with the French franc, it was also a de facto currency used in Andorra .- Etymology :... |
– | – | 4.14% |
| FRF French franc The franc was a currency of France. Along with the Spanish peseta, it was also a de facto currency used in Andorra . Between 1360 and 1641, it was the name of coins worth 1 livre tournois and it remained in common parlance as a term for this amount of money... |
19.83% | 19.06% | 20.32% |
| GBP Pound sterling The pound sterling , commonly called the pound, is the official currency of the United Kingdom, its Crown Dependencies and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence... |
13.34% | 14.98% | 12.45% |
| GRD Greek drachma Drachma, pl. drachmas or drachmae was the currency used in Greece during several periods in its history:... |
– | 1.31% | 0.44% |
| IEP Irish pound The Irish pound was the currency of Ireland until 2002. Its ISO 4217 code was IEP, and the usual notation was the prefix £... |
1.15% | 1.20% | 1.09% |
| ITL Italian lira The lira was the currency of Italy between 1861 and 2002. Between 1999 and 2002, the Italian lira was officially a “national subunit” of the euro... |
9.49% | 9.98% | 7.84% |
| LUF Luxembourgish franc The Luxembourgish franc was the currency of Luxembourg between 1854 and 1999 . The franc remained in circulation until 2002, when it was replaced by the euro... |
– | – | 0.32% |
| NLG | 10.51% | 10.13% | 9.98% |
| PTE Portuguese escudo The escudo was the currency of Portugal prior to the introduction of the Euro on 1 January 1999 and its removal from circulation on 28 February 2002. The escudo was subdivided into 100 centavos.... |
– | – | 0.7% |
See also
- Asian Monetary UnitAsian Monetary UnitAsian Monetary Unit is a basket of currencies proposed by the Japanese government's Research Institute of Economy, Trade and Industry . It is similar to the now-defunct European Currency Unit .-AMU baskets:...
- Eco (currency)Eco (currency)The Eco is the proposed name for the common currency that the West African Monetary Zone plans to introduce in the framework of ECOWAS. Originally the introduction of the currency was planned for December 1, 2009, however this date was revised to 2015. The original five member states are the...
- World currency unitWorld Currency UnitA world currency unit is a concept of monetary foreign exchange that surfaced after the Great Depression and the financial crisis created by World War II uncovered the deficiencies of the Gold Standard....