The rocky road to monetary union

The idea of creating a monetary union in Europe can be traced back a long way. Indeed, in the first century AD, a merchant could pay with the same money, the denarius, throughout his long journey from Rome via Colonia Claudia Ara Agrippinensium and Lutetia Parisiorum to Londinium – that is, via Cologne and Paris to London. Sixteen centuries later, however, the same journey involved an unending sequence of money changing and conversion. Trade was heavily hampered by high tariffs between countries and even broke down in the frequent times of war. In Germany alone, if one may call it that, a hundred different territories exercised the right to mint their own coinage. The number of customs borders in this region in 1790 has been estimated at some 1,800. It was only with the establishment of the customs union in 1834 that most trade barriers disappeared in Germany. And it was only following political unification within the German Reich in 1871 that the multiplicity of coinages was fully abolished and the Mark introduced as the common currency.

What lessons might we draw from comparing these epochs of European history?

There were two conditions that characterised the common currency period:

• The stability of the currency was ensured by the natural scarcity of the metal.

• A common currency went hand in hand with political union under the Pax Romana.