The European common currency – the Euro – is often thought of as a new and bold political experiment of the 21st century. As of 2016, 19 members of the European Union use the Euro, which has also become the world’s second most traded currency. But as groundbreaking as many believe the Euro is today, it wasn’t Europe’s first common currency.
That honor belongs to the now defunct Latin Monetary Union. The Latin Monetary Union was established in 1865 by founding members France, Belgium, Italy and Switzerland. This arrangement wasn’t a single currency among participating members per se. Instead, each country retained its individual national currency, but harmonized the weights and finenesses of their gold and silver coins. This was possible because countries in the mid 19th century relied on fixed gold or silver standards.
A single currency unit in the Latin Monetary Union was defined as a 5 gram coin of 83.5% fine silver. The largest silver coin was 5 units, weighing 25 grams of 90% silver. The workhorse high denomination gold coin was 20 units, weighing 6.4516 grams of 90% fine gold. And the largest gold coin was 100 units, weighing a hefty 32.258 grams of 90% gold. Any silver coins smaller than 5 units were only struck in 83.5% silver because they were fiduciary coinage only, ineligible to settle large payments or debts.
Although there were only four participants to the agreement initially, membership soon grew. Romania, Spain and Greece joined in 1868. Peru, Columbia and Venezuela soon followed. Finland, Serbia and Bulgaria also adopted the standard. Austria-Hungary went halfway, striking some coins that matched the Latin Monetary Union’s requirements and others that did not.
Even tiny Albania joined the Latin Monetary Union upon its independence from the Ottoman Empire in 1912, although it didn’t mint coins until the 1920s. So many coins were struck to Latin Monetary Union standards in the late 19th and early 20th century that they are still commonly encountered in the collector’s market today.
In hindsight the Latin Monetary Union was shockingly successful. A preponderance of European nations joined the treaty along with a handful of Latin American countries as well. It wasn’t perfect however. At first the free coinage of both silver and gold was embraced. This meant that an individual could go to the national mint of a Latin Monetary Union member with either raw gold or silver and have it coined into legal tender.
But due to the discovery of massive quantities of silver in Nevada’s Comstock Lode in the Western U.S. in the 1860s, the price of silver soon declined precipitously in relation to gold. This naturally led to destabilizing arbitrage, where people took cheap, raw silver to the mint to have it coined and then exchanged it for more valuable gold coins.
This situation eventually forced the Latin Monetary Union members onto a de facto gold standard when they finally agreed to limit the quantity of silver coins they would mint. Some countries could not resist the temptation to debase their money, however. Greece, that perpetual basket case of monetary intransigence, was expelled from the Latin Monetary Union in 1908 due to recurring debasement. In spite of these occasional problems, the Latin Monetary Union flourished from its founding in 1865 until the onset of World War I in 1914.
World War I, though, was the final twilight of the Latin Monetary Union. The war blew out the national budgets of all belligerent nations. The countries involved in the global conflict turned to the expediency of currency debasement in an attempt to ameliorate their fiscal plights. This rendered the previously robust international monetary agreement inoperative almost overnight.
A couple nations not involved in the war – Switzerland and Venezuela – struggled on issuing coins that conformed to the old standard for decades to come. The fatally wounded Latin Monetary Union was finally officially euthanized in 1927 after it became apparent that most nations involved in World War I were never going to reestablish their pre-war parity gold standards. Lonely Switzerland struck the final coinage adhering to the old specifications in 1967 – a 5 gram 1 franc piece and a 10 gram 2 franc coin, both of 83.5% silver.
Thus a noble, if doomed, experiment in international monetary synchronization ended. I suspect that barring a full political union, the current Euro currency will share the same fate as its Latin Monetary Union predecessor. The massive, unrelenting forces clawing at the periphery of Europe’s current pecuniary arrangement are already plainly obvious to the casual observer. How long the Euro lasts is anyone’s guess, but I doubt it will even take a world war to dismantle it.
