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European Currency Unit
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The European Currency Unit (?; ECU) (the word ECU, pronounced either , , or ) 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 January 1, 1999, at parity. The ECU itself replaced the European Unit of Account, also at parity, on March 13, 1979. The European Exchange Rate Mechanism attempted to minimize fluctuations between member state currencies and the ECU.
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The European Currency Unit (?; ECU) (the word ECU, pronounced either , , or ) 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 January 1, 1999, at parity. The ECU itself replaced the European Unit of Account, also at parity, on March 13, 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.
On 1 January 1999, the euro (with the code EUR and symbol €) 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").
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 Union 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.
Although the acronym ECU is formed from English words, at the same time the word écu was a reference to an ancient French coin of the same name. 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.
The currency's symbol, ? (U+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.
Approximate national currency weights to the ECU value | Currency | 13.03.1979-
16.09.1984 | 17.09.1984-
21.09.1989 | 21.09.1989-
31.12.1998 |
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| BEF | 9.64% | 8.57% | 8.183% | | DEM | 32.98% | 32.08% | 31.955% | | DKK | 3.06% | 2.69% | 2.653% | | ESP | - | - | 4.138% | | FRF | 19.83% | 19.06% | 20.316% | | GBP | 13.34% | 14.98% | 12.452% | | GRD | - | 1.31% | 0.437% | | IEP | 1.15% | 1.20% | 1.086% | | ITL | 9.49% | 9.98% | 7.840% | | LUF | - | - | 0.322% | | NLG | 10.51% | 10.13% | 9.98% | | PTE | - | - | 0.695% |
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