The Legacy of a Single Currency

Article excerpt

In a valley in Western Bohemia, in the Czech Republic, lies the town of Jachymov. It was here that the silver mines owned by the famous Slik (Schlick) family produced a coin in 1519 which was named the Joachimsthaler, the thaler, which the Americans where to transmute into the dollar.

In Europe it remained the thaler, or in its Bohemian dialect form, the tolar. It continued to be coined into the reign of the Empress Maria Theresa, who gave it its most famous name, the Maria Theresa Thaler, destined, in a somewhat bizarre fashion, to be the currency of Saudi Arabia, so great was its credibility. The Schlick dynasty, whose silver mines had produced the original dollar, also rose with the prestige of their creation. 1519 was a momentous year for the House of Habsburg, for it was the year when the Emperor Maximilian died, and his grandson, the nineteen year-old Duke of Burgundy and King of Spain, was elected Holy Roman Emperor of the German Nation.

Such a disparate empire needed a common currency or even a single currency. Charles's Chancellor, the Italian Mercurino de Gattinara, himself of the family of Dante, who dreamed of Italian unification, proposed that his master should strive towards such a goal. Perhaps he remembered, as others had done, that the four touchstones of the original Roman Empire had been a common law, a common citizenship, a common bureaucracy and a common currency. These have continued to be the touchstones of all attempts to unify Europe since. As a common law, a common corpus of law at least has been growing in what is now the European Union since 1958, together with a common bureaucracy and, since 1993, a common citizenship, the common or single currency remains the elusive fourth part of this political mosaic. The ECU, or European Currency Unit, was created in 1979, and has developed into a kind of common currency or proto-currency ever since.

By the Treaty of European Union a Committee of European Central Banks would come into being, the precursor of which is the European Monetary Institute, already in place, and operating as an embryo Bank of Europe in Frankfurt. Perhaps dangerously the Maastricht Treaty outlines a time frame.

Convergence criteria are of course necessary before the Single Currency can be a reality, and if no date is fixed (possibly by the Inter-Governmental Conference which is now underway) then the ESCB must be established on 1 July 1998. The participating member states will then agree the conversion rates at which their currencies will be irrevocably fixed, and exchanged for ECUs, and the ECU will then become the single currency. This makes it all seem relatively simple, and much ink has already been spilt on this subject. But if all does go ahead, then what will the new currency be called, and what can be learnt from previous attempts at monetary union in Europe?

We might ask why the United States adopted the dollar as its now only too-well known currency in 1787, a currency which had begun in far-off Bohemia in 1519. The United States had at first no uniform system of currency. Pounds, Spanish dollars, doubloons, moidores, carolines, pistoles and ducats all passed from hand to hand, with a bewildering variety of paper money. Counterfeiting and clipping were common. Nothing apparently did more to arouse a demand for a strong national government than the feeling of businessmen that they needed a stable currency, a protection against dishonest debtors, and a safeguard against a conflicting set of State tariffs.

The Spanish peso and the Portuguese eight-real piece were large silver coins practically identical in weight and fineness, and being both an imitation of the famous thaler, which had been produced in Bohemia for nearly three centuries. Because of their proximity to the West Indies and the Spanish Empire the only coinage which the Americans had used at all commonly in colonial times was Spanish - though, interestingly, reckonings were usually given in pounds, shillings and pence. …