Despite setbacks by the Theresa May Conservative Party government, Great Britain still plans to exit the European Union. The possibility of France following evaporated with the election of Emmanuel Macron as president. The Netherlands voted to retain the status quo in March. Upcoming elections in several other countries are determining if those nations will continue their EU membership. Iceland is considering pegging its currency to the euro. Outrageous amounts of so-called outdated coins and bank notes from EU currency union member countries have never been exchanged for euros, likely due to fear.
The question has to be asked: Will the EU’s currency union survive? If it doesn’t survive, the EU will go down in history as the largest currency union ever to fail. Regardless, the EU won’t go down in history as being the first such union. Currency unions have existed since ancient times. Greek city-states often shared currency weight standards to ensure coins of one city-state would be accepted at another. The Attic, the Corinthian and the Aeginetan standards were each important to the ancient Greek monetary standards used throughout the Mediterranean Sea region.
Currency unions existed in medieval Europe. In 1385 the four Rhineland imperial electors consisting of the archbishops of Cologne, Mainz, and Trier along with the Coujt Palatine of the Rhine formed a monetary union based on the gulden. The union lasted until 1515. Cleves, Julich, Munster and Onsnabruck occasionally joined this group.
A better known medieval currency union was formed by the Hanseatic League. Gold coins of Lubeck dominated the trade within this group.
In more modern history, the North German Zollverein custom union of 1818 became a factor in the unification of Germany in 1871.
The Latin Monetary Union initially consisted of Belgium, France, Italy and Switzerland. Even the United States considered joining. The U.S. $4 Stella gold coin was minted for that reason. The LMU existed between 1865 and 1927, finally disbanding due to wars and the disparity between the values of gold and silver.
Similar pressures led to the disbanding of the Scandinavian Monetary Union in 1924. The SMU began in the 1870s.
Connecticut, Massachusetts Bay, New Hampshire and Rhode Island each honored the paper money of the other three until 1750. Known collectively as the New England colonies, each of these colonies even accepted the money of the other three when collecting taxes. Inflation and devaluation led to the end of this arrangement when Massachusetts began redeeming its money for silver.
We’ve seen the Commonwealth of Independent States attempt to keep the currency “common” within the independent nations that were born from the ashes of the Soviet Union late in the 20th century. Currency unions have been proposed for a group of Arab states, for North America and for the Western Hemisphere.
The French Overseas Issuing Institute, Central Bank of West African States, Bank of Central African States and East Caribbean Currency Union are still functioning.
But, what about the EU and its euro coins and bank notes? A recent Bloomberg news analysis concluded more than 15 billion euro (about $16 billion US) in now obsolete currencies previously used by EU currency union participants is still outstanding. Germany, France and Spain, in that order, are the countries most responsible for this lack of redemption. Germany has yet to set a date at which time redemption of the older mark will expire. France stopped redeeming francs in 2012. Spain allows the peseta to be redeemed until 2020.
Among the 12 national central banks that no longer redeem their former currencies are Finland, Greece and Italy. Greece has its own internal fiscal problems that may yet get the nation expelled from the currency union. Greece is required to implement reforms agreed to by eurozone finance ministers in April. Greece is seeking its third loan since 2010; however, the International Monetary Fund has said the IMF will not participate in the bailout. Greece needs to make a payment on debt in July.
Italy may have a different set of problems. In 2016 the constitutional court ordered the Bank of Italy to redeem 2.5 million euros worth of obsolete lira currency. The public had been complaining the bank moved its exchange date deadline up by three months during 2011.
Euro coins and bank notes are still in high demand. The ECB will be publishing a study in the near future that indicates that more than three-quarters of all point-of-sale transactions within the EU are made in cash. According to the survey, the 50-euro is the most widely used euro bank note denomination. The more than 9 billion 50-euro bank notes in circulation represent 46 percent of all euro bank notes in use.
The ECB is forging ahead, with new 100-euro and 200-euro Europa series bank notes planned to be released at the beginning of 2019.
ECB President Mario Draghi said of the cash study, “Even in this digital age, cash remains essential in our economy.”
Iceland’s acceptance of pegging its krona currency against the euro is a plus. On April 2 Iceland Finance Minister Benedikt Jóhannesson was quoted by The Telegraph newspaper as saying, “The main thing is, if you want to peg against a currency, do it against a currency where you do business. Once you decide on a currency, that will also change the future. You will do more business with that area.”
Germans fear the eurozone debt crisis could be a problem. In 2011 more than half of the Germans surveyed indicated they wanted the German mark to be restored. Alternative for Germany (AFD), a right-wing populist political party, pushed for Germany to leave the EU; however, to date their efforts have led to nil.
Germany is still on edge. In January, Germany’s Foreign Minister Sigmar Gabriel told Der Spiegel newspaper, “It is no longer unthinkable for the EU to break apart.”
Germany votes in September. AFD is anticipated to win seats in the Bundestag. Chancellor Angela Merkel will be challenged by Martin Schulz, a Social Democrat.
Italy holds elections in early 2018. Two of the leading candidates are calling for a referendum on that nation’s euro membership. Should Italy leave, what about San Marino and Vatican City? The currency of each city-state is legally tied to Italy. Each issues euro coins for that reason.
The Rhineland imperial electors held their currency union together for 130 years. The question now is how long can the European Union hold its currency union together.
This article was originally printed in World Coin News. >> Subscribe today.
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