Latin Monetary Union
Encyclopedia
The Latin Monetary Union (LMU) was a 19th century attempt to unify several Europe
an currencies
, at a time when most circulating coins were still made of gold
and silver
. It was established in 1865 and disbanded in 1927.
, Belgium
, Italy
, and Switzerland
formed the Latin Monetary Union and agreed to change their national currencies to a standard of 4.5 gram
s 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. The four nations were joined by Spain
and Greece
in 1868, and Romania
, Bulgaria
, Venezuela
, Serbia
, San Marino
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.
The LMU served the function of facilitating trade between different countries by setting the standards by which gold and silver currency could be minted and exchanged. In this manner a French trader could accept Italian liras for his goods with confidence that it could be converted back to a comparable amount of francs.
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. 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.
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. 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.
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
an currencies
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
, at a time when most circulating coins were still made of gold
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...
and silver
Silver
Silver is a metallic chemical element with the chemical symbol Ag and atomic number 47. A soft, white, lustrous transition metal, it has the highest electrical conductivity of any element and the highest thermal conductivity of any metal...
. It was established in 1865 and disbanded in 1927.
History
By a convention dated 23 December 1865, FranceSecond French Empire
The Second French Empire or French Empire was the Imperial Bonapartist regime of Napoleon III from 1852 to 1870, between the Second Republic and the Third Republic, in France.-Rule of Napoleon III:...
, Belgium
Belgium
Belgium , officially the Kingdom of Belgium, is a federal state in Western Europe. It is a founding member of the European Union and hosts the EU's headquarters, and those of several other major international organisations such as NATO.Belgium is also a member of, or affiliated to, many...
, Italy
Kingdom of Italy (1861–1946)
The Kingdom of Italy was a state forged in 1861 by the unification of Italy under the influence of the Kingdom of Sardinia, which was its legal predecessor state...
, and Switzerland
Switzerland
Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....
formed the Latin Monetary Union and agreed to change their national currencies to a standard of 4.5 gram
Gram
The gram is a metric system unit of mass....
s of silver or 0.290322 gram of gold (a ratio
Ratio
In mathematics, a ratio is a relationship between two numbers of the same kind , usually expressed as "a to b" or a:b, sometimes expressed arithmetically as a dimensionless quotient of the two which explicitly indicates how many times the first number contains the second In mathematics, a ratio is...
of 15.5 to 1) and make them freely interchangeable. The agreement came into force on 1 August 1866. The four nations were joined by Spain
Mid-nineteenth century Spain
Spain in the 19th century was a country in turmoil. Occupied by Napoleon from 1808 to 1814, a massively destructive "war of independence" ensued, driven by an emergent Spanish nationalism. An era of reaction against the liberal ideas associated with revolutionary France followed the war,...
and Greece
Kingdom of Greece
The Kingdom of Greece was a state established in 1832 in the Convention of London by the Great Powers...
in 1868, and Romania
Kingdom of Romania
The Kingdom of Romania was the Romanian state based on a form of parliamentary monarchy between 13 March 1881 and 30 December 1947, specified by the first three Constitutions of Romania...
, Bulgaria
Principality of Bulgaria
The Principality of Bulgaria was a self-governing entity created as a vassal of the Ottoman Empire by the Treaty of Berlin in 1878. The preliminary treaty of San Stefano between the Russian Empire and the Porte , on March 3, had originally proposed a significantly larger Bulgarian territory: its...
, Venezuela
Venezuela
Venezuela , officially called the Bolivarian Republic of Venezuela , is a tropical country on the northern coast of South America. It borders Colombia to the west, Guyana to the east, and Brazil to the south...
, Serbia
Kingdom of Serbia
The Kingdom of Serbia was created when Prince Milan Obrenović, ruler of the Principality of Serbia, was crowned King in 1882. The Principality of Serbia was ruled by the Karađorđevic dynasty from 1817 onwards . The Principality, suzerain to the Porte, had expelled all Ottoman troops by 1867, de...
, San Marino
San Marino
San Marino, officially the Republic of San Marino , is a state situated on the Italian Peninsula on the eastern side of the Apennine Mountains. It is an enclave surrounded by Italy. Its size is just over with an estimated population of over 30,000. Its capital is the City of San Marino...
in 1889. In 1904, the Danish West Indies
Danish West Indies
The Danish West Indies or "Danish Antilles", were a colony of Denmark-Norway and later Denmark in the Caribbean. They were sold to the United States in 1916 in the Treaty of the Danish West Indies and became the United States Virgin Islands in 1917...
were also placed on this standard but did not join the Union itself. When Albania
Albania
Albania , officially known as the Republic of Albania , is a country in Southeastern Europe, in the Balkans region. It is bordered by Montenegro to the northwest, Kosovo to the northeast, the Republic of Macedonia to the east and Greece to the south and southeast. It has a coast on the Adriatic Sea...
emerged from the Ottoman Empire
Ottoman Empire
The Ottoman EmpireIt was usually referred to as the "Ottoman Empire", the "Turkish Empire", the "Ottoman Caliphate" or more commonly "Turkey" by its contemporaries...
as an independent nation in 1912, coins of the Latin Monetary Union from France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
, Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
, Greece
Greece
Greece , officially the Hellenic Republic , and historically Hellas or the Republic of Greece in English, is a country in southeastern Europe....
, and Austria-Hungary
Austria-Hungary
Austria-Hungary , more formally known as the Kingdoms and Lands Represented in the Imperial Council and the Lands of the Holy Hungarian Crown of Saint Stephen, was a constitutional monarchic union between the crowns of the Austrian Empire and the Kingdom of Hungary in...
began to circulate in place of the Ottoman lira
Ottoman lira
The Ottoman lira was the currency of Ottoman Empire between 1844 and 29 October 1923 . It replaced the kuruş as the principal unit of currency, with the kuruş continuing to circulate as a subdivision of the lira, with 100 kuruş = 1 lira. The para also continued to be used, with 40 para = 1 kuruş...
. Albania did not however mint its own coins, or issue its own paper money until it adopted an independent monetary system in 1925.
The LMU served the function of facilitating trade between different countries by setting the standards by which gold and silver currency could be minted and exchanged. In this manner a French trader could accept Italian liras for his goods with confidence that it could be converted back to a comparable amount of francs.
With the tacit agreement of Napoleon III of France
Napoleon III of France
Louis-Napoléon Bonaparte was the President of the French Second Republic and as Napoleon III, the ruler of the Second French Empire. He was the nephew and heir of Napoleon I, christened as Charles Louis Napoléon Bonaparte...
, Giacomo Cardinal Antonelli, the administrator of the Papal Treasury, embarked on an ambitious increase in silver coinage
Zecca
Zecca, Italian for "mint" , may refer to:* The historical Papal mint located in Vatican City.* The mint of the Italian Republic, Istituto Poligrafico e Zecca dello Stato, which is still active....
without the prescribed amount of metal. The papal coins quickly became debased and excessively circulated in other union states, to the profit of the Holy See
Holy See
The Holy See is the episcopal jurisdiction of the Catholic Church in Rome, in which its Bishop is commonly known as the Pope. It is the preeminent episcopal see of the Catholic Church, forming the central government of the Church. As such, diplomatically, and in other spheres the Holy See acts and...
, but eventually Swiss and French banks rejected papal coins and the Papal States were ejected from the Union.
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. From 1873 onwards, the Union was on a de facto gold standard
Gold standard
The gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard...
.
Failure
The LMU eventually failed for a number of reasons. Some members, notably the Papal State's treasurer, Giacomo Cardinal Antonelli, began to debase their currency. This meant he minted coins with an inadequate amount of silver and then exchanged them for coins from other countries that had been minted correctly. More importantly, because new discoveries and better refining techniques increased the supply of silver, the fixed LMU exchange rate eventually overvalued silver relative to gold. German traders, in particular, were known to bring silver to LMU countries, have it minted into coinage, then exchange those for gold coins at the discounted exchange rate. These destabilizing tactics eventually forced the LMU to convert to a pure gold standard for its currency (in 1878). Greece was ejected from the union in 1908, for decreasing the amount of gold in their coins.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
World War I
World War I , which was predominantly called the World War or the Great War from its occurrence until 1939, and the First World War or World War I thereafter, was a major war centred in Europe that began on 28 July 1914 and lasted until 11 November 1918...
, brought the Latin Monetary Union to its final end in practice, even though it continued 'de jure
De jure
De jure is an expression that means "concerning law", as contrasted with de facto, which means "concerning fact".De jure = 'Legally', De facto = 'In fact'....
' 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.
Coins
Below are examples of coins of 5 units.| tyle="padding: 0 8px 8px 0;"| | |
See also
- Napoleon (coin)Napoleon (coin)The Napoleon is the colloquial term for a former French gold coin. The coins were minted in denominations of , , , , and francs. This article will focus on the 20 franc coins issued during the reign of Napoleon, which are 21 mm in diameter, weigh 6.45 grams and, at 90% pure, contain 0.1867...
- Sardinian liraSardinian liraThe lira was the currency of the Kingdom of Sardinia between August 6, 1816 and March 17, 1861. It was subdivided into 100 centesimi and was equal in value to the French franc , which had replaced the Piedmontese shield by 1801...
- Romanian leu#First leu
- Spanish pesetaSpanish pesetaThe peseta was the currency of Spain between 1869 and 2002. Along with the French franc, it was also a de facto currency used in Andorra .- Etymology :...
- Venezuelan bolívarVenezuelan bolívarThe bolívar fuerte is the currency of Venezuela since 1 January 2008. It is subdivided into 100 céntimos and replaced the bolívar at the rate of Bs.F. 1 = Bs...
- First World WarWorld War IWorld War I , which was predominantly called the World War or the Great War from its occurrence until 1939, and the First World War or World War I thereafter, was a major war centred in Europe that began on 28 July 1914 and lasted until 11 November 1918...
- Latin UnionLatin UnionThe Latin Union is an international organization of nations that use Romance languages, with the aim of protecting, projecting, and promoting the common cultural heritage and unifying identities of the Latin, and Latin-influenced, world. It was created in 1954 in Madrid, Spain, and has existed as a...
- European Economic and Monetary UnionEconomic and Monetary Union of the European UnionThe Economic and Monetary Union is an umbrella term for the group of policies aimed at converging the economies of members of the European Union in three stages so as to allow them to adopt a single currency, the euro. As such, it is largely synonymous with the eurozone.All member states of the...
- EuroEuroThe euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
- BimetallismBimetallismIn economics, bimetallism is a monetary standard in which the value of the monetary unit is defined as equivalent both to a certain quantity of gold and to a certain quantity of silver; such a system establishes a fixed rate of exchange between the two metals...
- Currency unionCurrency unionA currency union is where two or more states share the same currency, though without there necessarily having any further integration such as an Economic and Monetary Union, which has in addition a customs union and a single market.There are three types of currency unions:#Informal - unilateral...
- Stella (United States coin)Stella (United States coin)The United States four dollar coin, also officially called a Stella, is a unit of currency equivalent to four United States dollars.-History:...
- Gold standardGold standardThe gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard...