Parallel to Latin and Germanic Monetary Unions, Europe experienced a third similar experience�
41 Cf� Droulers, op. cit., p� 53-54�
42 Cf� Luzzatto, Gino, Storia economica dell’età moderna e contemporanea, Vol� II, L’età contemporanea, Padua CEDAM, 1960, p� 337�
43 Cf� North, op. cit., p� 194�
44 On this question please see Holtfrerich, Carl-Ludwig, Did Monetary Unification Precede or Follow Political Unification of Germany in the 19th Century?, in European Economic Review, Vol� 37, No� 2-3, April 1993, p� 518-524; Vanthoor, Wim F� V�, European Monetary Union since 1848: A Political and Historical Analysis, London, Edward Elgar Publishing, 1996� Both the authors insist and demonstrate how any monetary union would only succeed if supported by much closer political union among the member States�
The Scandinavian Monetary Union45, activated from 1872 to 1931 among Denmark, Norway46, and Sweden, gave rise to an integration that involved not only the metal currency as in the previous cases, but also the banknotes, which could freely circulate outside the issuing State� The largest cultural solidarity that united the three Nordic States allowed them to go farther than the Latin Monetary Union, which although had been their initial reference� Unfortunately, it did not prevent the emergence of economic and political differences and the SMU was already fragile when it had to face the indirect consequences of the First World War� The deep disruption of markets, caused by the conflict, did not spare these neutral governments and the Union came out dying47�
Like most of the European States, the three countries had experienced severe monetary disorder in the early 19th century� Their currency systems were based on silver, according to the model of the city of Hamburg, which they had close commercial relationships with� The unit was called everywhere “thaler”, but its equivalence in metal and its subdivisions varied: the Norwegian thaler was worth two Danish thalers or four Swedes thalers and it was divided into 120 shillings, while the Danish thaler corresponded to six marks, and each mark was worth 16 shillings; only the Swedish thaler had a decimal division in 100 øre� This complexity did not disturb a strong circulations in the three States� On average, one-fifth of the circulation of each country was made up of the currencies of the others, and locally, in the border areas, the phenomenon was greater, as in the south of Sweden, where mainly Danish coins circulated� The
45 On the history of the Scandinavian Monetary Union, please see, among the others:
Lindgren, Raymond E�, Norway-Sweden: Union, Disunion, and Scandinavian Integration, Princeton, Princeton University Press, 1913; Bergman, U� Michael, Gerlach, Stefan, Jonung, Lars, “The Rise and Fall of the Scandinavian Currency Union 1873-1920”, in European Economic Review, Vol� 37, No� 2, 1993, p� 507-517; Henriksen, Ingrid, Kærgård, Niels, “The Scandinavian Currency Union 1875-1914”, in Reis, Jaime (ed�), International Monetary Systems in Historical Perspective, London, Palgrave-Macmillan, 1995, p� 91-112; Talia, Krim, The Scandinavian Currency Union 1873-1924: Studies in Monetary Integration and Disintegration, Stockholm, Stockholm School of Economics, 2004; Jonung, Lars, The Scandinavian Monetary Union 1873-1924, cit�; Øksendal, Lars Fredrik, “The Impact of the Scandinavian Monetary Union on Financial Market Integration”, in Financial History Review, Vol� 14, No� 2, October 2007, p� 125-148;
Sørensen, Anders Ravn, “Monetary Romanticism: Nationalist Rhetoric and Monetary Organisation in Nineteenth-Century Denmark”, in Scandinavian Economic History Review, Vol� 61, No� 3, 2013, p� 209-232�
46 From 1814 to 1905 Norway was an independent kingdom, with its own constitution and its own parliament, though the crown was held by the King of Sweden� Following the separation of the two countries, in 1906 Haakon VII, son of Frederick VIII of Denmark, was crowned King of Norway�
47 Cf� Olszak, op. cit., p� 67�
same situation was found in the reserves of the issuing banks, where the currencies of neighboring States accumulated48�
The three Scandinavian countries had participated at the 1867 Paris International Conference, which did not achieve practical results but created a lot of expectations for membership to the LMU�
Sweden seemed to be particularly interested, and since 1869 it began to adapt its monetary system to the French one� Sweden coined a new gold coin, called karolin, which was identical to the 10 French francs coin�
The karolin had no legal tender, but it was used for commercial purpose�
However, it should be noted that it was a gold coin, while LMU’s reference was rather silver, as it did, indeed, in the Scandinavian systems�
The 1867 Paris discussions had shown great hesitation among the three Nordic countries, who wondered if it was reasonable to join a bimetallic system in crisis, the LMU, while the main trading partners, such as Britain, used the gold standard, or, as the German States, were preparing to do so� The German unification in progress was another hesitation factor since attracted Norway and created hardships in Denmark, proven by the defeat of 186449� These fears were quickly wiped out by the results of the Franco-Prussian War of 1870� The victory of Germany weakened the positions of France, of silver and of bimetallism proponents and reaching the German system and aligning to its principles resulted political impossible for the Nordic States�
The development of a purely Scandinavian system was decided�
For this purpose, a Currency Commission was established� It met in Copenhagen on 19 August 1872� The agreement for monetary union was signed in Stockholm on 18 December 1872, but the next Treaty was ratified on 27 May 1873 only by Christian IX of Denmark and Oscar II of Sweden� On the contrary, the Norwegian Parliament rejected it with a narrow majority, fearful that the monetary union would serve to reinforce political union with Sweden� However, in October 1875 Norway coined a new currency: the crown, divided into 100 øre, which respected the rules of the 1872 Agreement� This made possible the subsequent accession into the Scandinavian Monetary Union, thanks to a new treaty of 16 October 187550�
48 Cf� de Cecco, Marcello, European Monetary and Financial Cooperation before the First World War, in Rivista di storia economica, 1992, No� 1-2, p� 55-76, specifically p� 66; Olszak, op. cit., p� 70-71�
49 Ivi, p� 72� In 1864, Austria and Germany declared war on Denmark� Defeating it, they obtained the administration of the duchy of Schleswig-Holstein�
50 Cf� Dowle, Anthony, Monnaies modernes de 1789 à nos jours, Fribourg, Office du Livre, 1972, p� 164�
The text of the founding document of the Scandinavian Monetary Union was really inspired to the Monetary Agreement of 1865� First of all, it appeared as a list of technical requirements on the issue of the metallic money, corresponding to a new common unit, the crown, which was equal in weight and standard to the old Swedish gold coin�
The pieces would have the same weight and size in each country and only effigies and inscriptions would have varied from country to country�
Correspondence with previous coins was fixed as follows: a crown had the value of one Swedish thaler, of half Danish thaler and of one quarter of Norwegian thaler� In fact, the new common system was drawn on the old Swedish system, which was already a decimal system�
From a brief analysis, the Scandinavian monetary system seemed freer than Latin Monetary Union, because there was no limitation regarding both the minted quantities and the liberating power51� This lack of restriction was justified by the impossibility of fixing quotas since in each of the three countries the currency needs were difficult to estimate�
However, this freedom was only apparent, because the Convention contained a clause of unlimited redemption: any issuer State undertook to resume all issued divisional coins at the request of another country and to encash them into gold� Thus excessive emissions by the individual States were discouraged� Nevertheless, it must be underlined that a similar redemption clause existed in the Latin Monetary Union, with the possibility of exchange in gold or silver shields, but it seemed inadequate and was supplemented by very strict quantitative restrictions, which were frequently contested afterwards52� Moreover, there was, another severe clause, according to which a member State could not conclude other agreements without the consent of the partners53�
Since the early years, the Scandinavian Monetary Union experienced the dominion of the fiduciary circulation, facilitated by the existence of small denomination banknotes� Since the start of the agreement, each central bank of the three countries accepted at par the banknotes issued by the others, even if for a long time there was no written commitment�
The agreement between Norway and Sweden was signed only in 1894 and Denmark joined in 1901� Furthermore in 1885 started a Scandinavian
51 Cf� Bartel, Robert J�, International Monetary Unions: The 19th Century Experience, in Journal of European Economic History, 1974, No� 3, p� 689-704, specifically p� 698�
52 Cf� Olszak, op. cit., p� 73-74�
53 This clause, which was intended to avoid any indirect and involuntary reunification to the German system or to the Latin Monetary Union’s system, contrasted with the remarkable opening of the 1865 Paris Convention, which provided nothing in this sense and allowed new adhesions without agreement of the founders� Cf� ibidem�
clearing agreement� The three central banks mutually opened current accounts, which functioned without interest or bank charges� The clearing was done every three months and the debit balances should be adjusted in gold54, but this favorable system was denounced by the Bank of Sweden in 1905, shortly after the political break with Norway�
None of the Scandinavian countries took part in the First World War;
however, they were economically involved in the dramatic situation, so that the Scandinavian Monetary Union was suspended in 1914 for the duration of World War I and hardly began to work again after 1918�
Sweden was the first country in Europe to re-establish convertibility of banknotes in January 1924; Denmark followed in December of 1926; then Norway in May 1928, but the monetary rules were very different among the three countries and in Denmark, in particular, the free convertibility was done in very high value gold bars� Actually, the circulation of gold in Europe was almost over�
Following the crisis of 1929, the three Scandinavian countries abandoned one after the other the gold exchange standard, which had become untenable, and tried to enter the area of the pound: it happened in 1933� 1931 marked the end of the 1872 Convention55�
In fact, the cultural and economic similarities, albeit fundamental, were not able to guarantee the success and the duration of Scandinavian Monetary Union: the lack of a basic customs union, winning in the German case, and the persistence of different trade policies (which were liberal in Denmark and protectionist in Sweden and Norway) prevented in the Nordic countries the birth of a single market and led to the collapse of intra-community trade for the benefit of international trade with Great Britain and Germany56�
Finally, as for the Latin Monetary Union, even in the case of the Scandinavian Monetary Union the absence of a supranational body that could coordinate the monetary policy of the various States led each country to follow its own path, to the detriment of cooperation57�
54 Cf� de Cecco, European Monetary and Financial Cooperation, cit�, p� 67�
55 Cf� Olszak, op. cit., p� 81�
56 Cf� Fauri, op. cit., p� 29� The same consideration is presented by Bergman, U� Michael,
“Do Monetary Unions Make Economic Sense? Evidence from the Scandinavian Currency Union, 1873-1913”, in The Scandinavian Journal of Economics, Vol� 101, No� 3, September, 1999, p� 363-377�
57 Ibidem�
4. Conclusions
The history of these three experiences shows that national monetary unions in Europe have lasted only as long as centralized governments have been able to maintain national political union� In case of supranational monetary unions, the monetary link is weaker and unions can be terminated without the destruction of a nation state� So far, looking to nowadays, if the European Union remains as it is, not proceeding towards a federation or a single political entity, the euro will remain a “temporary” arrangement, which could last few or many years but will not be permanent58�
Monetary unions, however, tend to be rather persistent and dissolve only after very substantial economic or military shocks have created strong divergent political interests� From this historical analysis, it is clear that major economic shocks can destroy economic conditions for union: the economic divergence caused by the First World War deleted the Latin Monetary Union, while the Great Depression dissolved the Scandinavian Monetary Union� On the other hand, history teaches that successful monetary unions consolidate in a full political unification: the Münzverein becomes the German Monetary Unification (mark) after the creation of the German Empire in 187159�
Political unification followed by monetary unification has usually required a war, while supranational monetary unions have been the consequence of peace and free trade� Monetary unions alone, however, are not an absolute guarantee of peace and harmony� The political will to maintain a high level of cooperation remains crucial, and needs to be renewed continuously, without excessive confidence in the automatic development of institutional arrangements60�
58 Cf� Einaudi, “The Generous Utopia of Yesterday Can Become the Practical Achievement of Tomorrow”, cit�, p� 104�
59 Nuno, Valério, “Europe in the Mirror of Germany: To What Extent Does German Unification (1815-1888) Prefigure the Unification of Europe (1947-…)?”, in The Journal of European Economic History, Vol� 41, No� 2, Summer 2012, p� 117-146�
60 Cf� Einaudi, “The Generous Utopia of Yesterday Can Become the Practical Achievement of Tomorrow”, cit�, p� 104�