Mark? Franc? No, It's ECU

For a decade or more, leaders of Europe's Common Market countries have toyed with the tempting idea of forming a monetary union. Each time, attempts at linking national currencies were abandoned as premature because of widely different rates of inflation and economic growth within the European Community. The foundering dollar, though, has overshadowed these objections. Spurred by West German Chancellor Helmut Schmidt and French President Valery Giscard d'Estaing, the Common Market is moving rapidly and seriously toward a new monetary scheme that would stabilize currencies of the nine member nations and thus enhance trade among them. It would also distance members from the influence of the weakening dollar and create a rival reserve currency in the world.

Last week Common Market finance ministers met in Brussels to thrash out details of the proposed system. At its core would be the European Currency Unit, or ECU, whose value would be based on a "basket" of European currencies in which the German mark would weigh the most heavily. The ECU would be not a bill or a coin but a series of accounts that member governments would use. European currencies would be allowed to fluctuate around the ECU in a narrow band of 1% either way, and the ECU would float against the dollar. Moreover, when member nations intervened on foreign-exchange markets to support or depress their own currencies, they would no longer use dollars but any of the ECU currencies. Within the proposed currency union, payments between nations would be made in ECUS rather than dollars in order to isolate Europe as much as possible from the U.S, currency.

There are also plans to set up a new European monetary fund, which would make loans to weaker members of the system that needed to finance deficits or prop up their currencies to ECU levels. How much each nation would contribute to the common fund is still being discussed, but the West Germans would supply the major share.

U.S. Treasury officials, while not opposing the European initiative in principle, have important reservations. One concern, which the U.S, shares with Britain and Italy, is that an economic group dominated by the West Germans would end up with conservative fiscal and monetary policies that would severely limit economic growth. Another fear is that the ECU, once established, would invite speculators and governments from Togo to Turkey to dump dollars for the ECU currencies, thus bringing more downward pressure on the dollar. Economist Robert Triffin, a U.S. monetary expert who has long championed a European currency, believes that it would help rather than hurt the dollar's stability in the long run. The final form of the common European money system remains uncertain, but, said Federal Reserve Board Governor Henry Wallich, "something will emerge because there is a big push behind it, and a lot of political capital has been invested."

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