One of the early efforts to establish a uniform and universal coinage, equally acceptable in all countries, led to the formation of the Latin Monetary Union. The union itself came to life through the work of a conference held in Paris, France, in 1865. In addition to France, three other countries, Italy, Switzerland, and Belgium, participated in the conference, all three of which were on the French bimetallic system. This conference was the first international meeting on monetary affairs.
Under a bimetallic system silver and gold coins circulated as money and the government set the value of silver relative to gold at a fixed ratio. Before the conference the value of silver was rising, causing holders of silver to buy gold and leading to the disappearance of silver. Switzerland debased the value of its silver coins to address the problem, and France responded by banning the acceptance of Swiss coins in public offices. The immediate technical problem facing the conference participants was the overvaluation of silver. Under the bimetallic system of the Latin Monetary Union, 15.5 ounces of silver stood equal to 1 ounce of gold in all member countries.
The conference participants saw the treaty creating the Latin Monetary Union put into effect on 1 August 1866. The States of the Church (the lands in central and north-central Italy that were ruled by the pope) joined the union later in 1866, followed by Bulgaria and Greece in 1867. Member countries minted gold pieces in denominations only of 100, 50, 20, 10 and 5 francs. They also minted silver pieces in denominations of 5, 2, and 1 francs and 50 and 20 silver centimes. Each country minted coins that were made legal tender and circulated throughout the union.
In 1867 France called another conference to discuss the establishment of a uniform world monetary system. Hopes of expanding French influence and prestige may have supplied the motive that pushed Louis Napoleon to call the conference. The need to keep the bimetallic monetary standard alive and working in the face of competition from England’s gold standard may also have been a contributing factor.
The United States accepted the concept of a world monetary union and made a case for France to begin minting a 25-franc gold piece. Spokesmen for the United States, whose arguments for the 25-franc piece fell on deaf ears in France, observed that:
[S]uch a coin will circulate side by side everywhere and in perfect equality with the half eagle of the United States and the sovereign of Great Britain. These three gold coins, types of the great commercial nations, fraternally united and differing only in emblems, will go hand in hand around the globe freely circulating through both hemispheres without recoinage, brokerage, or other impediments. This opportune concession of France to the spirit of unity will complete the work of civilization she has had so much at heart and will inaugurate that new monetary era, the lofty object of the international conference, and the noblest aim of the concourse of nations, as yet without parallel in the history of the world.
The conference ended without reaching an agreement, only passing a resolution to meet again. England had refused to support the plan for a world monetary union, but did establish a Royal Commission on International Coinage to study the findings of the conference. The commission acknowledged the advantages of an international currency, citing that:
Small manufacturers and traders are deterred from engaging in foreign transactions by the complicated difficulties of foreign coins by the difficulty in calculating the exchanges, and of remitting small sums from one country to another. Anything tending to simplify these matters would dispose them to extend their sphere of operations.
Nevertheless, the commission cited numerous practical considerations that stood in the way of forming an international currency.
The commercial success of Great Britain persuaded the major trading partners of the world that the gold standard was the wave of the future। The fate of the bimetallic system of the Latin Monetary Union was sealed when France lost the Franco-Prussian War and had to pay war reparations to Germany. The war reparations enhanced Germany’s gold reserves, giving Germany the wherewithal to follow England’s example and adopt the gold standard. The value of silver dropped sharply, and the members of the Latin Monetary Union had to restrict the coinage of silver. The union wobbled on until the 1920s when the strains of war and diverging gold and silver prices put an end to the system.
The idea of a European monetary union, complete with a European central bank, became a reality on 1 January 1999 when the European Central Bank launched the euro. The euro does not presently circulate as bank notes or coins, but only as money of account. It will eventually circulate as bank notes and coins, and will replace major European currencies, such as the German mark and the French franc. This monetary union with its uniform currency will end the risk of fluctuations in foreign exchange rates and the inconvenience of converting domestic money into foreign exchange, thus easing the path for the growth of international trade.