Coins of Different Faces, but the Same Weight

The Promise of Equal Weight

In 1865, under the leadership of France, the Latin Monetary Union was formed with Belgium, Italy, and Switzerland. This union did not establish a common central bank or fiscal discipline, but only a standard for coinage.

The standard was the five-franc silver coin, specified to have a total weight of twenty-five grams and a fineness of nine hundred parts per thousand. This amounted to twenty-two and a half grams of pure silver. The value ratio of gold to silver was set at fifteen and a half to one. As long as these dimensions, weight, and fineness were maintained, it did not matter whether the portrait on one side was the French emperor, the Belgian king, or the Swiss goddess. It was because of this uniformity in specifications that coins with different country names and languages could circulate at equal value across borders.

A Circle Expanding Beyond the Signatories

Only the initial four countries and Greece, which joined later, in 1868, were formal members of the union. However, the standard itself spread far beyond the treaty's signatories.

Peru had adopted silver coins of the same dimensions as early as 1863, before the union was formed. Colombia and Venezuela, Finland in Northern Europe, and Serbia and Bulgaria in the Balkans followed suit. The Spanish peseta and the Romanian leu also copied the standard without formally joining. Without being bound by the treaty, any country could have one foot in the franc zone simply by matching the weight and fineness.

Promise-Breakers and a Powerless Union

However, this flexibility was also a weakness. With no common supervisory body, there was no way to punish countries that broke the promise. The Papal States exploited this loophole from within.

From 1866, Cardinal Antonelli, who controlled the Holy See's finances, minted large quantities of silver coins with less precious metal than specified. The amount is said to have equaled Belgium's entire annual mintage. These debased silver coins were pushed onto neighboring countries, but banks in Switzerland and France refused to accept them, and the Papal States were expelled in 1870. Greece, which debased its coinage whenever it faced financial difficulties, was also expelled in 1908. All the union could do was shut them out.

The Scales Tipped by Silver

The backbone of the union was shaken by the crash in the price of silver in the 1870s. At the established ratio of fifteen and a half to one, silver was now overvalued. A profit could be made by bringing silver to France, minting it into coins, and exchanging them for gold.

In the single year of 1873, the silver brought to the French mint came to 154 million francs. The union restricted the free mintage of silver coins in 1874 and halted it in 1878. However, the silver coins already minted were not demonetized and continued to circulate at face value. They could be used alongside gold coins, even though their metallic value was below their face value. This hobbled state was called the "limping standard."

The union would walk on for half a century, burdened with silver coins that would lose value if melted down. A clause was later added requiring countries that left the union to redeem their silver coins with gold. If it could not prevent withdrawal, it would at least make it costly. Such was the nature of this union.