Thursday, February 11, 2016

European Monetary Union Without Political Union

I recently read Richard Davenport-Hines' Universal Man: The Lives of John Maynard Keynes. One thing I learned was of the existence of the Latin Monetary Union.

Apparently, in the latter half of the nineteenth century, gold and silver coins circulated in a number of European countries in which they speak Romance languages. And the amount of gold or silver in these coins was specified. I guess this is part of being on the gold standard. I gather the countries in the Latin Monetary Union agreed on a fixed ratio of silver to gold. As part of this agreement, coins from all these countries circulated freely throughout these countries. You could spend a franc coin in Italy just as conveniently as a lira coin.

I am surprised that this union lasted past World War I. From Keynes' Tract on Monetary Reform (1924), I recall something about the European inflations and deflations that hit Europe after World War I. Yet from my limited reading, I do not recall much about the stresses that must have arisen in this monetary union. Larger issues seem to me to revolve around how the allies in the United States in the war could pay off their loans and how Germany could pay their reparations, agreed to at Versailles, while abiding by the limitations on their economy - such as the occupation of the Ruhr - imposed by the allies. My interest here might be biased by my interest in Keynes, since these issues were a major point of Economic Consequences of the Peace.


PGB said...

As far as I recall, the Latin Union was always under stress, particularly Spain and Greece, which entered and left the bloc repeatedly.
What is also very interesting is the European Payments Union, which lasted from 1950 to 1958. That experience is very enlightening.

Robert Vienneau said...

Thanks, I hadn't heard of that either. I know dreams of European unity go back some time, but I know very little of the history.