European Currency Unit

European Currency Unit

The European Currency Unit (ECU) was a monetary unit used by the European Community (EC) from 1979 to 1999. It served as a precursor to the euro, which is the current common currency of the Eurozone.

History

The ECU was established on March 13, 1979, as an accounting unit to facilitate economic and monetary cooperation among the member states of the EC. It was not a physical currency but rather a basket of currencies used for calculating exchange rates and as a reference point for economic indicators.

The ECU consisted of a weighted average of the currencies of the member states, with each currency's weight determined by its share in the total GDP of the EC. Initially, the ECU included the currencies of nine member states: Belgium, Germany, France, Italy, Luxembourg, the Netherlands, Denmark, Ireland, and the United Kingdom.

Over time, the ECU played a crucial role in the process of European integration. It served as a tool for harmonizing monetary policies and promoting economic stability among the member states. The ECU also facilitated trade and investment within the EC by providing a common reference point for exchange rates.

Conversion to the Euro

The ECU paved the way for the introduction of the euro, which became the official currency of the Eurozone on January 1, 1999. The conversion from the ECU to the euro was a significant step towards further economic integration in Europe.

The exchange rate between the ECU and the euro was fixed at 1:1, meaning that one ECU was equal to one euro. However, the ECU continued to exist as an accounting unit until February 28, 2002, when it was completely replaced by the euro.

Legacy

Although the ECU is no longer in use, its legacy can still be seen in the euro. The euro symbol (€) was derived from the Greek letter epsilon (ε), which was the symbol used for the ECU. Additionally, the ECU's role in promoting economic cooperation and stability within the EC laid the foundation for the creation of the European Central Bank (ECB) and the Eurozone.

See Also

• Euro
• European Central Bank
• Eurozone