Past, Present and Future
Edited by Eric J. Pentecost and André Van Poeck
Chapter 1: The historical background to European Monetary Union
1. The historical background to European Monetary Union Eric J. Pentecost and André van Poeck 1 EUROPEAN MONEY: A HISTORICAL PERSPECTIVE TO EMU The introduction on 1 January 1999 of the euro for intra-banking sector transactions and the establishment of the European Central Bank (ECB), marked the beginning of a new era in European monetary arrangements. With a common currency for use as a medium of exchange to follow the introduction of the new unit of account in 2002, Western Europe will have a uniﬁed coinage system for the ﬁrst time since Charlemagne in AD 800. This latest currency reform represents the end of a process that began in the late 1970s with the European Monetary System (EMS), which ﬁxed the exchange rates of a number of the European Union (EU) member countries’ currencies, and is the last of a long line of currency reforms in continental Europe. To place these recent monetary developments into their historical context, this chapter examines European monetary cooperation and development since the midnineteenth century when many of the modern European nation states ﬁrst came into existence, up until the establishment of the EMS in 1979. Developments since 1979 are considered in the rest of book, as this date marks the modern beginnings of European Monetary Union (EMU). Nineteenth-century Monetary Unions in Europe At the end of the Napoleonic wars in 1815, Europe was a fragmented continent. Belgium, Italy and Germany were not single nations and Switzerland, although a federation of states, did not...
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