European Currency Unit (ECU)

The European Currency Unit (ECU) was a synthetic "basket" currency utilized by the member states of the European Union (EU) as their internal accounting unit.

This "basket" currency was weighted based on each country's contribution to EU output. The currencies included were the Belgian franc, the German mark, the Danish krone, the Spanish peseta, the French franc, the British pound, the Greek drachma, the Irish pound, the Italian lira, the Luxembourgish franc, the Dutch guilder, and the Portuguese escudo.

The term écu is recognized as a word and refers to an ancient French coin in French. The ISO-4217 symbol for the ECU was "XEU".

The ECU was established on March 13, 1979, by the European Economic Community (EEC), the predecessor of the European Union, as a unit of account for the currency area known as the European Monetary System (EMS).

The EEC created the ECU with the intention of eventually making it the single currency for a unified western European economy.

The ECU's value was used to set exchange rates and reserves among EMS members, but it functioned primarily as an accounting unit rather than a physical currency.

Although it was not used for everyday transactions, it became increasingly common in commercial banking transactions. Its relative stability made it more appropriate than national currencies for establishing contractual terms.

By the early 1990s, the ECU was particularly significant in the international bond market, where it had become the second most widely used currency after the U.S. dollar.

The ECU served as a precursor to the new single currency of the European Union, the euro, which was launched on January 1, 1999.