Sunday, January 08, 2012

An Interesting History of Monetary Unions

The Euro isn't the first time the Europeans tried to implement a common currency. And it isn't the first time they had problems. A history of currency unions | World news | Funny this synopsis leaves out the old Soviet Union, which like the US was also a monetary union of sorts.

This one seems to be most like the current situation.
The Latin Monetary Union
In 1865, France persuaded Belgium, Italy, Switzerland and Greece to enter into a currency union. The gold and silver coins of each country were made legal tender and freely interchangeable across the area. The union was initially successful and several other currencies joined informally.

The current Spanish currency was actually created because Spain was preparing to join (peseta being a subdivision of the peso, or "unit"), although it never did. Eventually, the pressures of wars and the growing disparity between the value of gold and silver caused the union to fade away by the 1920s. It was formally ended in 1927.
Monetary Unions only seem to work when they are political as well. The current US currency dates from either the Civil War, or the early 20th Century depending on who you believe. But the point is, it is backed up by a political union. Doubtful you can get the Europeans to turn over all sovereignty to Brussels. Not if there are any elections between now and then.

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