more than the SDR against the dollar (Chart 1). As for interest rates, the
ECU is found to have generally carried the highest (Chart 2). The rates of
dollar assets were generally below those of both the ECU and the SDR. In
fact, it is only since the end of 1977 that dollar rates have risen to levels
similar or even higher than those of the two currency baskets.
Finally, when account is taken of the overall yield deriving from interest
payments and exchange rate variations, 100 dollars invested in each of
these assets at the beginning of 1973 would have produced, at the end of
November 1980, 216 dollars, if the investment had been made in assets
denominated in ECUs, 204 dollars if in SDRs and 181 dollars if the funds
had been held in the US currency (Chart 3). Even when the simulation is
extended to the currencies of the two other major countries, the yen and
the Deutschemark - the latter of which has the dominant weight in the
Community basket - the yield of the ECU appears satisfactory. In fact, during the period in question the performance of investments in these two
currencies is found to have been only slightly better than that of an investment in ECUs - respectively 232 and 241 dollars in the previous example but, given the smaller exchange rate variations of the ECU, its use would
have better fitted the requirements of lenders and borrowers.
If past experience is any guide to the future, the figures given above provide good grounds for believing that the ECU can play a more active and
important role in the denomination of both fixed and variable rate bond issues. And this is true not only for the international markets, but also, if
suitable forms are adopted, for domestic markets, as is shown, for
example, by the success of 1979 ECU-linked loan by San Paolo Bank.
Indeed, this bank deserves praise for having included an Italian name in
the list of those who have developed financial formulas based on composite units of account, thus opening the way for the new monetary unit born
with the EMS to be used in capitai markets. It is obvious, however, that the
support for this type of issue in individuai domestic markets must take
account of the limits present in the various countries in the form of
exchange, monetary and credit controls. Real freedom for ECU securities
to be issued and to circuiate must necessarily be set in the framework of a
progressive integration of national markets and of harmonization of the
existing rules and regulations.
The active interest of the monetary authorities in the development of this
role of the ECU is confirmed by some projects that are now under consideration.
The ECOFIN Council is about to revise and extend the mechanism of Community loans to help member countries overcome balance-of-payments
difficulties. It will be possible to arrange such loans, either directly with
third countries and financial agencies or in the capitai markets, and to de20