Together with the Exchange Rate Mechanism (ERM) it formed the European Monetary System which was established in 1979.

It was originally an accounting unit for the community's internal budget.

But later it became more like a real currency - for example it was used in travellers' cheques and bank deposits, though it was never issued as a note or coin.

As economic and monetary union developed, it formed the basis for the development of the Euro, the EU's single currency.