Pacific Exchange Rate Service

Sauder School of Business • University of British Columbia
A service for academic research and teaching provided by Prof. Werner Antweiler at UBC's Sauder School of Business since 1996.
European Currency Unit (ECU)
A Brief History of the ECU, the Predecessor of the Euro

What was the european currency unit?

The European Currency Unit, ECU for short, was an artificial "basket" currency that was used by the member states of the European Union (EU) as their internal accounting unit. The ECU was conceived on 13th March 1979 by the European Economic Community (EEC), the predecessor of the European Union, as a unit of account for the currency area called the European Monetary System (EMS). The ECU was also the precursor of the new single European currency, the euro, which was introduced on January 1, 1999. The acronym ECU is considered a word and in French is the name of ancient French coin. The ISO-4217 symbol for the ECU was "XEU".

How was the ECU linked to the European Monetary System?

The EMS was a limited-flexible exchange rate system that defined bands in which the bilateral exchange rates of the member countries could fluctuate. The bands of fluctuation were characterized by a set of adjustable bilateral central parities and margins that defined the bandwidth of permissible fluctuations. This set of parities was called a parity grid as it defined parities for all combinations of the ECU constituent currencies. The borders of the fluctuation bands were described by the upper intervention point and lower intervention point. Typically, the bandwidths were 2.25% to each side, with a wider margin for the Italian Lira. After a currency crisis in 1993, the bands were widened to 15% on each side, but in practice the fluctuations were kept within a narrow band. When a market exchange rate reached either of these intervention points, the central banks were compelled to support these rates indefinitely through open market operations (buying of weakened currency or selling of a strengthened currency). Some countries (notably Britain) initially did not participate in the exchange rate mechanism of the EMS. Britain participated actively in the EMS only for a short period.

What was the value of an ECU?

When the euro was introduced in January 1999, it replaced the ECU at par (that is, at a 1:1 ratio).

The tables on the right shows the composition of the ECU basket as it evolved over time through the expansion of the European Union. Note that the compostion values in the table below are fixed, while the weights fluctuate due to changes in the bilateral exchange rates.

How can one calculate the value of an ECU?

To calculate the value of the ECU (XEU) with respect to another currency (say, USD), divide each of the twelve amounts of national currency in the ECU basket (see table above) by the corresponding exchange rates of that country vis-à-vis the target currency (DEM/USD, FRF/USD, GBP/USD, etc.). Then add these twelve numbers together to obtain the USD/XEU exchange rate.

Where can I get more information?

  • The European Central Bank
  • Giancarlo Gandolfo: International Economics II: International Monetary Theory and Open-Economy Macroeconomics, Springer Verlag, Berlin: 1987, pp. 380-393, 404-411.

13-Mar-1979 through 16-Sep-1984
ISO Currency Value Weight
BEF Belgian Francs 3.80 9.64
DEM German Marks 0.828 32.98
DKK Danish Krones 0.217 3.06
FRF French Francs 1.15 19.83
GBP British Pounds 0.0885 13.34
IEP Irish Punts 0.00759 1.15
ITL Italian Lira 109 9.49
LUF Luxembourg Francs (*) (*)
NLG Dutch Guilders 0.286 10.51

Technical Notes: The Belgian and Luxembourg francs were in a currency union. Thus, the ecu basket values are combined and shown only for Belgium. Weights are evaluated at central parities on March 13, 1979.

17-Sep-1984 through 21-Sep-1989
ISO Currency Value Weight
BEF Belgian Francs 3.85 8.57
DEM German Marks 0.719 32.08
DKK Danish Krones 0.219 2.69
FRF French Francs 1.31 19.06
GBP British Pounds 0.0878 14.98
GRD Greek Drachmas 1.15 1.31
IEP Irish Punts 0.00871 1.20
ITL Italian Lira 140 9.98
LUF Luxembourg Francs (*) (*)
NLG Dutch Guilders 0.256 10.13

Technical Notes: The Belgian and Luxembourg francs were in a currency union. Thus, the ecu basket values are combined and shown only for Belgium. Weights are evaluated at central parities on September 17, 1984.

21-Sep-1989 through 31-Dec-1999
ISO Currency Value Weight
BEF Belgian Francs 3.301 8.183
DEM German Marks 0.6242 31.915
DKK Danish Krones 0.1976 2.653
ESP Spanish Peseta 6.885 4.138
FRF French Francs 1.332 20.306
GBP British Pounds 0.08784 12.452
GRD Greek Drachmas 1.44 0.437
IEP Irish Punts 0.008552 1.086
ITL Italian Lira 151.8 7.840
LUF Luxembourg Francs 0.13 0.322
NLG Dutch Guilders 0.2198 9.87
PTE Portugese Escudos 1.393 0.695

Technical Notes: During the period May 3, 1998 through December 31, 1998, the rates of the 9 currencies that are part of the ECU basket as well as euro-11 member currencies were irrevocably fixed. Weights are evaluated at the prevailing exchange rates on December 31, 1998.

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