Latin Monetary Union

The Latin Monetary Union (LMU) was a 19th century attempt to unify several European currencies into a single currency that could be used in all the member states, at a time when most national currencies were still made out of gold and silver. It was established in 1865 and disbanded in 1927.

History

By a convention dated 23 December 1865, ^[1] France, Belgium, Italy, and Switzerland formed the Latin Monetary Union and agreed to change their national currencies to a standard of 4.5 grams of silver or 0.290322 gram of gold (a ratio of 15.5 to 1) and make them freely interchangeable. The agreement came into force on 1 August 1866.^[2] The four nations were joined by Spain and Greece in 1868, and Romania, Austria-Hungary, Bulgaria, Venezuela, Serbia, Montenegro, San Marino and the Papal States in 1889. In 1904, the Danish West Indies were also placed on this standard but did not join the Union itself. When Albania emerged from the Ottoman Empire as an independent nation in 1912, coins of the Latin Monetary Union from France, Italy, Greece, and Austria-Hungary began to circulate in place of the Ottoman Lira. Albania did not however mint its own coins, or issue its own paper money until it adopted an independent monetary system in 1925.^[3]

With the tacit agreement of Napoleon III of France, Giacomo Cardinal Antonelli, the administrator of the Papal Treasury, embarked on an ambitious increase in silver coinage without the prescribed amount of metal.^[4] The papal coins quickly became debased and excessively circulated in other union states, to the profit of the Holy See, but eventually Swiss and French banks rejected papal coins and the Papal States were ejected from the Union.^[2]

By 1873, the decreasing value of silver made it profitable to mint silver in exchange for gold at the Union's standard rate of 15.5 ounces to 1. Indeed, in all of 1871 and 1872 the French mint had received just 5,000,000 francs of silver for conversion to coin, but in 1873 alone received 154,000,000 francs. Fearing an influx of silver coinage, the member nations of the Union agreed in Paris on January 30, 1874, to limit the free conversion of silver temporarily. By 1878, with no recovery in the silver price in sight, minting of silver coinage was suspended absolutely.^[5] From 1873 onwards, the Union was on a de facto gold standard.

Even though the minting of new silver coinage ceased, the existing silver coins continued in circulation, and the fluctuations in the values of gold and silver were somewhat of a nuisance. The political turbulence of the early twentieth century which culminated in the First World War, brought the Latin Monetary Union to its final end in practice, even though it continued 'de jure' until 1927, when it came to a formal end.

The last coins made according to the standards of the Union were the Swiss fifty-centime, one-franc, and two-franc pieces of 1967.

Non-members

United Kingdom

An interesting parallel can be seen between the discussions in the United Kingdom concerning the possibility of Britain joining the Latin Monetary Union,^[6] and the current discussions concerning British membership of the euro.^{[clarification needed]}

The proposal involved reducing the amount of gold in one pound sterling by less than 1% to make one pound equivalent to 25 Francs and also decimalising the currency.

During the period of the Latin Monetary Union, the United Kingdom was already in a monetary union with Australia, New Zealand, Fiji and the British Western Pacific Territories, South Africa, British West Africa, the British West Indies and some smaller colonies such as Gibraltar, and Malta in the Mediterannean, and the Falkland Islands in the South Atlantic. The gold standard of the British gold sovereign existed in these territories until the outbreak of the first world war in 1914, and it was the first world war which 'de facto' brought the Latin Monetray Union to an end.

United States

The United States made several steps that could have prepared the country for joining the Latin Monetary Union, but never did so. Its gold coinage was already within four percent of the LMU standard at the rate of 5 LMU francs per U.S. dollar. The Mint Act of 1873 increased the mass of the dime, quarter dollar, and half dollar slightly to 25 grams of .900 fine silver per dollar, putting them on the LMU standard, a standard that was maintained until the minting of U.S. silver coins was halted in 1965. 1875 saw the introduction of the 20¢ piece which contained 5 grams of .900 fine silver, the same standards as one franc. In addition, the United States Mint produced pattern coins called Stellas in 1879 and 1880 that would be worth 4 U.S. dollars or 20 French francs. However, as close as it came, the United States never joined, decided not to resize its gold coins, repealed the legislation authorizing the 20¢ piece after only three years, and kept its large silver dollar which was minted using a 16 to 1 ratio for silver to gold.

Throughout most of the duration of the Latin Monetary Union, the United States was in a 'de facto' monetary union with Canada on the basis of the American Gold Eagle coin.

Coins

Below are examples of coins of 5 units.

5 Greek drachmae 1876 George I of Greece Coat of arms of Greece	5 Belgian francs 1868 Leopold II of Belgium Coat of arms of Belgium
5 French francs 1868 Napoleon III of France Coat of arms of the Second Empire	5 Italian lire 1874 Victor Emmanuel II of Italy Coat of arms of the House of Savoy
5 Spanish pesetas 1885 Alphonso XII of Spain Coat of arms of Spain	5 Venezuelan bolívares 1912 Simón Bolívar Coat of arms of Venezuela

See also

• Peseta
• Venezuelan bolívar
• First World War
• Latin Union
• European Economic and Monetary Union
• Euro
• Bimetallism
• currency union

References

External links

• Grand-dad of today's Euro: The Latin Monetary Union (1865-1927)
• Coins of the Latin Monetary Union: 1865 - 1926