MONETARY UNION. An agreement between two or more countries, whereby the national currency of each contains an equal amount of gold and silver, so that the mint par of exchange between them is in the ratio of one to one, and the coins of each country adhering to the union can, by custom if not by law, circulate freely in all the countries, parties to the agreement.
The outstanding example of this is the Latin Monetary Union, founded in 1863 and embracing France, Belgium, Switzerland, Italy and later Greece. Each country kept its own nomenclature for its currency, France, Belgium and Switzerland terming their monetary unit the franc, Italy the lira, and Greece the drachma. The important point was that, by the laws of each country, 3,100 of these units must be coined from a kilogramme of gold, .835 fine, and 200 from a kilogramme of silver. It may be added that all members of the union originally recognized the double stand ard of gold and silver, in the ratio of 3,100 : 200 or 154 : 1. Based on the gold standard, the par of exchange with England is Frs. 25.2215 equal to one pound sterling. It was only in 1873 that, owing to the depreciation of silver, all the members of the union agreed to limit the coinage of new silver five-franc pieces, and by thus putting an end to the "free coinage" of silver, placed their common currency virtually upon the gold standard. Hence forward, the double standard was known as the "limping stand ard," in recognition of the fact that silver had been divorced from an equal position to gold.
Certain other countries, although not members of the Union, employed as their unit of currency a coin equivalent to the franc or lira. Among these were Spain (the peseta), Serbia (the dinar), Bulgaria (the leva), and Rumania (the leu). All these were equal to a franc, lira or drachma at the mint par of exchange. The other important monetary union was the Scandinavian Union, comprising Sweden, Norway and Denmark. Here the national monetary units even had a common name, the krone.
The Scandinavian Union was formed between Sweden and Den mark in 1873, and Norway joined two years later. Kr. 18.159 equal one pound sterling.
The World War broke up both unions. Bank-notes and cur rency notes were never recognized as currency within the terms of the union, and were never legal tender beyond the frontiers of the issuing country. Currency inflation and restrictions on the import and export of coin and notes, gold and silver, put an end to monetary unions in fact, if not in name, and even when, in recent years, stabilization and revaluation of depreciated curren cies has proved practicable, each country has fixed the stabiliza tion point at the level most convenient to itself, regardless of its former associates in the union. Thus the old mint par of ex change of the franc, lira and drachma against sterling was Frs. 25.2215 to the pound. When Belgium stabilized in 1926, the new par was fixed at 35 belgas to the pound. The belga was a new unit, in its turn equivalent by law to five francs, so this means a new par of Frs. 175 to the pound. A year later, Italy was able to stabilize, and she selected the ratio of 366 new lire to loo old gold lire, thus making the new mint parity 92.46 lire to the pound. The Swiss franc never depreciated, and parity has been kept at Frs. 25.22 to the pound. Finally, in 1926, France stabilized her franc "de facto" at 124 francs to the pound, while in early 1929 the drachma was quoted at 375 to the pound.
Although members of the Scandinavian Union also suffered from inflation, the attacks of the disease were not unduly severe, and recovery proved practicable. The Swedish crown returned to a gold basis in 1924, the first of all European currencies, and a few years later heroic efforts brought the Norwegian and Danish crowns nearly back to par, Norway actually returning to gold in April, 1928. The post-war period also introduced a fourth member, the Estonian kroon. (N. E. C.)