1 Franc – Grand Duchy of Luxembourg

In 1988, the Grand Duchy of Luxembourg was a full and active participant in the European Monetary System (EMS), a key framework for exchange rate stability established in 1979. Its currency, the Luxembourg franc, was legally distinct but permanently and irrevocably pegged at a 1:1 parity to the Belgian franc, forming the Belgium-Luxembourg Economic Union (BLEU). This decades-old arrangement meant Luxembourg did not have an independent monetary policy; its currency circulation and interest rates were effectively managed in coordination with the Belgian central bank, though the Luxembourg Monetary Institute (precursor to the Central Bank of Luxembourg) held certain supervisory roles.

The domestic economy in 1988 was robust, transitioning successfully from its industrial past into a leading international financial centre. This booming banking and investment sector, however, created a unique monetary context. While the physical Belgian franc circulated widely, Luxembourg issued its own franc coins and banknotes (the Lëtzebuerger Frang), which were legal tender only within its own borders. For practical and international purposes, the two currencies were treated as one, with financial transactions and accounting often simply referencing the "Belgian-Luxembourg franc" (BEF/LUF).

Looking forward, 1988 was a period of quiet preparation within the broader European context. The Single European Act of 1986 had set the stage for the single market, and discussions on Economic and Monetary Union (EMU) were gaining momentum. Luxembourg, a steadfast pro-European integrationist, was a strong advocate for this process. While the franc's peg provided stability, the long-term vision for Luxembourg's financial sector and its economy was already firmly aligned with the future adoption of a common European currency, a path that would ultimately lead to the euro.