The European Currency Unit was a basket of the currencies of the European Communitymember 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.
British proposal for a 'hard' ECU
In 1990 the British Chancellor of the Exchequer proposed the creation of a 'hard' ECU, which different national currencies could compete against and, if the ECU was successful, could lead to a single currency. The move was seen by France and Germany as a wrecking tactic, especially when the increasingly Euro-sceptic Thatcher announced her outright opposition to European Economic and Monetary Union, and the idea was abandoned.
Euro replaces ECU
On 1 January 1999, the euro replaced the ECU, at the value €1 = 1 ECU. Unlike the ECU, the euro is a real currency, although not all member states participate. 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
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 Union legislation to that effect. However, for abundant caution, several foreign jurisdictions adopted legislation to ensure a smooth transition. Of particular importance, the U.S. states of Illinois and New York adopted legislation to ensure a large proportion of international financial contracts recognized the euro as the successor of the ECU.
Etymology
Although the acronym ECU is formed from English words, écu is also the name of an ancient French coin. That was one 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, , 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 to use the ISO code XEU.
Coins and notes
As the ECU was only an electronic unit of account and not a full currency, it did not have any official coins or notes that could be used for everyday transactions. However, various European countries and organisations like the European Parliament made commemorative and mock-up coins and notes. A common theme on the coins was usually celebrating European unity, such as celebrating membership of the European Union. In 1989, the government of the Netherlands issued a series of ECU coins from ₠ to ₠200, which could be spent in shops in The Hague, during the European Capital of Culture festival. Gibraltar issued commemorative coins from 1993 through 1996, though these were legal tender only in Gibraltar, which uses the pound sterling.
