The Eurco – An ECU in the making?

Abstract

The European Investment Bank (EIB) was the first financial institution to test the markets with bonds denominated in ‘Eurcos’, a basket of all European Community currencies, loosely based on Member Countries’ share of GNP, in September 1973 and January 1974. This article aims to throw light on the circumstances of the creation of the Eurco, and establish EIB’s proactive role in promoting a new European monetary unit. The EIB was successful in raising the resources needed to finance its fast expanding lending activity, in a context of monetary instability. However, despite the fact that the Eurco concept was a precursor to the European Currency Unit (ECU) and was promoted by a prominent European institution, Eurco bond issues had limited influence on the course of events that led to the launch of the ECU, in 1979. The Eurco nonetheless helped consolidate EIB’s reputation as a ‘market-maker’ on the international financial markets, and prepared it to play a role in the creation of financial instruments for the promotion of the ECU.