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PASTOR GENERAL'S REPORT, FEBRUARY 14, 1986
have issued fixed interest rate bonds with principal and
interest payments made in ECUs.
More and more frequently, European firms are billing their
customers in ECUs and expressing a willingness to pay for
imports in ECUs.
European banks .!121'! issue ECU traveler's
checks, which can be readily exchanged throughout Europe for
local currency.
Both the New York Cotton Exchange and
Chicago's International Monetary Market (IMM) have plans for
creation of ECU futures markets soon, and the Philadelphia
Stock Exchange, the leader in currency options, is· exploring
the possibility of developing an option in the ECU.
In the words of one observant banker, "The ECO is already the
third currency after the dollar and the yen, and will probably
become the foundation of the world's third currency zone."
Such a prediction should motivate Americans to develop an
understanding of the ECU and its future direction.
The ECO is a currency without a country. Unlike the dollar,
the mark, the yen, or other prominent national currencies, no
central bank issues them.
ECO bank notes cannot be found.
Yet, commercial banks will take ECU deposits and make loans in
the ECO, just as they might do in their own currency •... The
ECU, sometimes referred to as a currency "basket," is composed
of specified amounts of the 10 currencies of the European
Economic Community.... What is an ECU worth?
The value of
this currency basket is determined by the value of its
constituent currencies.
The key exchange rate for quoting
ECUs is the exchange rate between the dollar and the 10
component currencies.•..
. The ECU is the official monetary unit of the European Economic
LCornmunity.... Over the years...European currencies changed in
relative value, with the French and Belgian francs and Italian
lira going down in value, and the Deutsche mark and guilder
going up in value...• It is expected that the Spanish peseta
and the Portuguese escudo will be included in the ECO no later
than the 1989 review period••.•
/Another mechanism enhances the stability of the ECU. The ECU
serves as the linchpin of the European Monetary System, the
mechanism designed to promote relatively stable exchange rates
between European currencies.... Ironically, West C..ermany...has
become the major
stumbling
block to full commercial
acceptability of the ECU.
Use of the ECU by residents is
prohibited•.•under Germany's 1948 currency law.... Clearly,
liberalization of C..erman law regarding payments in the ECU is
necessary to allow full and free European usage of the ECU in
commercial operations, since C..ermany constitutes Europe's
largest market••••
;<
Ultimately, the ECU may become� basis for� complete currency
union among countries of the European Community. While such a
major step is clearly a distant one, dependent on a
convergence of European economic policies and a major
;,<
sacrifice of national prerogatives, the rapid growth of the
ECU as a vehicle for private commercial and financial
•