By Tyler Rossi for CoinWeek …..
For many, the Euro Zone is the first single currency union in Europe. But in 1865, Napoleon III introduced the Latin Monetary Union or LMU in an attempt to make the world’s “strongest” currency. His uncle, Napoleon Bonaparte, had tried to unite Europe by military force, but Napoleon III tried to unite the continent with the Franc.
The LMU signatories, in conjunction with the other participating nations, “covered a wider area than the current eurozone.”
Unlike the Euro, which is a fiat currency based on the faith and credit of the European Union, the LMU was strictly a bimetallic gold and silver standardization. Signatory nations were expected to strike coins at a silver-to-gold ratio of 15.5:1, and this standardization was intended to ease barriers to trade and increase the flow of capital across borders. Between 1865 and 1874, there was a marked “increase in international trade with positive effects on the economy.”
This was not to last.
Described as Europe’s “first flawed single currency,” the LMU was destined to fail due to several factors inherent in its creation. These factors included repeated breaches of the treaty, constant fluctuations in the values of gold and silver, and flaws in the treaty adoption process.
When Napoleon III created the Latin Monetary Union, he needed to account for the rampant nationalism and general lack of willingness to relinquish sovereign power in the 1800s. Apart from France’s sheer economic might as the largest and most powerful country in Europe, as well as the threat of removal from the Union, there was no effective internal enforcement mechanism to force nations to adhere to treaty policies. For example, as early as 1866 the treasury o the Papal States, under the leadership of Giacomo Antonelli, decided to strike dramatically more silver coins than agreed upon under the treaty. This increase was “equivalent” to the total production of Belgium that same year.
Because the Papacy had not received a large external influx of silver, they reduced the quantity of precious metal in their coins, thus changing the silver to gold ratio in order to mint so many coins. The Papal States then exchanged their debased coinage for purer coins struck in the LMU’s other nations. This process “prov[ed] very profitable for the Vatican.” The LMU treaty stated that the base unit silver coin was supposed to contain five grams of silver. Instead, the early Vatican 1 lira coins contained between 4.95 and 4.98 grams. Their French counterparts weighed a true five grams. Examples of both coins can be seen below.
Eventually, when forced out of the LMU in 1870, the Vatican owed approximately 20 million lire, or 84 million euros, to the Union. This debt was due to the unauthorized debasement and removal of higher value currency from the Union. I was unable to find any evidence that this debt was ever repaid. I highly doubt that it was.
At the turn of the 20th century, the Greek economy was under threat of internal economic recession and therefore attempted a similar debasement of their gold coinage. This action forced Greece’s departure from the Union in 1908. Taking place right before World War I, this last debasement was the beginning of the end for the LMU. Shortly after Greece was re-admitted to the LMU in 1910, the world descended into war and for all intents and purposes the Union died with the fighting, “ending all monetary collaboration.”
The only activity of any significance in the Monetary Union after Greece’s 1910 readmittance was seen in Poland and Albania. In 1925 after the war, Poland struck 10 and 20 zlotych coins. Struck to commemorate Poland’s 900th anniversary, these coins depict King Bolesław (ruled 992-1025) on the obverse and the Polish state crest on the reverse. Known for being an excellent politician and statesman, he reunited Poland and is considered one of Poland’s best rulers. Both denominations are the same design and only differ in weight and value. At .9000 fineness, these coins adhere to LMU standards for gold coins and are comparable to earlier French gold francs struck at the start of the LMU.
Albania produced several gold coins in both 1926 and 1927, the most notable of which are the 10, 20, and 100 franga types. President Zog struck standardized gold pieces with his portrait on the obverse and the Albanian double eagle on the reverse. This obverse design appeared on the 10 and 100 franga denominations, which were struck in Rome. While a 10 and 20 franga were equal to 10 and 20-franc coins in agw and in fineness respectively, the 100 franga coin had an agw of 0.9334oz. This large coin, struck in Vienna, had a beautiful depiction of a two-horse chariot on the reverse. The commemorative 20 depicted the Albanian national hero Georgi Kastrioti, known as Skanderbeg, on the obverse.
Zog would proclaim himself king in 1928 and continue striking his own gold coinage until he fled the country in 1939 when Italian dictator Benito Mussolini made Albania an Italian protectorate.
In an attempt to further suppress predatory financial policies by member states, the Union forbade the printing of paper money based on the bimetallic currency. This policy of limited paper money supply is believed to have hurt economic growth. France and Italy (post-reunification) disregarded this rule and began printing fiat currency. An example of the French and Italian notes can be seen below.
Fluctuations in the value of gold and silver also played a role in the eventual disillusionment of the LMU. This was due to the fixed ratio of exchange between the metals. In 1800, the actual market ratio was 15.5 to 1, the ratio used in the LMU. The chart below demonstrates the volatility of the gold-to-silver ratio from 1821 to 1873 in both the London and Paris markets. With a high of 16.4 to 1 and a low of 15.3 to 1, it may have been difficult to create a floating ratio for the LMU. But it possibly could have saved the currency.
As a result of this fluctuation and external pressures from non-member states, members were forced to halt the production of their LMU standard silver coins in 1878. One such coin was the silver Swiss 2 franc weighing approximately 10 grams.
The last flaw in the LMU was its piecemeal adoption. Originally a four-part Union between France, Belgium, Italy, and Switzerland, Greece joined in 1867 after its independence from the Ottoman Empire. Negotiations with Spain and Romania quickly broke down and they unilaterally decided to follow the LMU standard. The German States refused to join and used the Zollverein, their own monetary Union, to practice predatory exchange policies against the LMU. For example, they exchanged debased silver coins for LMU gold in a fashion similar to the Papal States.
Slowly but surely many other countries, such as Peru, Bulgaria, Finland, Venezuela, and the French colonies (to name but a few) joined the LMU. This haphazard adoption process caused the Union to become internally fragmented and unable to withstand economic shocks with any reliability. Today, the LMU is a little-known footnote in European history that left behind an extremely limited impact.
The coins remain and are avidly collected by numismatists. Due to high mintages, they are mostly considered semi-numismatic and are easily acquired. In low grades, these coins are available with only a slight premium over melt value. In high grades, early LMU silver coinage can reach $300 to $400 USD apiece. Low-grade silver coins can be found relatively easily for $30 to $50. The gold coinage is similar. Unless the piece is fleur de coin or a rare variety, collectors can acquire specimens for a small premium over melt, usually 5% to 10%.
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About the Author
Tyler Rossi is currently a graduate student at Brandeis University’s Heller School of Social Policy and Management and studies Sustainable International Development and Conflict Resolution. Before graduating from American University in Washington D.C., he worked for Save the Children creating and running international development projects. Recently, Tyler returned to the US from living abroad in the Republic of North Macedonia, where he served as a Peace Corps volunteer for three years. Tyler is an avid numismatist and for over a decade has cultivated a deep interest in pre-modern and ancient coinage from around the world. He is a member of the American Numismatic Association (ANA).