Groupthink and Denial on a Grand Scale
Chapter 2: Early attempts at monetary union and the Hague Summit
The idea of a common currency in Europe or parts of Europe has long been entertained. In the 19th century, when Europe was undergoing the unification of states, the introduction of a common currency was seen as an essential element of nationhood. Germany united its states in 1834 and formed the German Customs Union (or Zollverein) with a common currency, the Vereinsmunze. In 1876, the Reichsmark became the national currency, once the German Reichsbank took control of all currency issuance (Holtferich, 1993). Similarly, the Italian unification of 1861 was also accompanied by the acceptance of the lira by all states. Other common currency arrangements formed in Europe in the 19th century collapsed. Upon attaining independence in 1830, Belgium adopted the French franc, which formed the ‘franc zone’. In 1848, France and Belgium formed the Latin Monetary Union (LMU) with Switzerland. Italy joined in 1861 with Greece and Bulgaria joining in 1867. In terms of our quest to understand modern developments, the motivation for the formation of the LMU came from France, which was concerned about its declining colonial power and loss of economic power (see Flandreau 1995, 2000; Einaudi 2000; Flandreau and Maurel, 2005).
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