From silver to bimetallism: the Latin Monetary Union

Gold discoveries and the revision of 1860

The Coinage Act of 1850 had scarcely taken effect when the international monetary environment changed fundamentally. The gold discoveries in California and Australia between 1848 and 1851 led to a sharp increase in the supply of gold and raised the market value of silver relative to gold.¹ In a bimetallic system such as the French, where gold and silver coins were both legal tender at a fixed ratio of 15.5 to 1, the undervalued metal, silver, tended to be exported and melted down, while gold coins took its place in circulation. Because the Swiss silver franc was identical to the French silver franc, Switzerland was drawn into the same dynamics. As Swiss silver coins flowed out and French gold coins flowed in, the country came in practice to rely on French gold for much of its larger payments.

The Swiss legislator responded with a revision of the Coinage Act on 31 January 1860, which recognised foreign gold coins and thereby introduced a bimetallic system.² The same law lowered the fineness of the subsidiary silver coins to 800 thousandths, while the five-franc piece remained at 900. The reduced fineness was intended to keep the small coins in the country by removing the incentive to melt them. Willis describes the measure as an adaptation of Swiss monetary arrangements to the dominance of French gold. It provoked a reaction from France, which by a decree of 14 April 1864 excluded the Swiss subsidiary coins from its customs offices to prevent profitable arbitrage between coins of different fineness.³

The convention of 23 December 1865

Belgium, which suffered most from the competition of different coinages of the same name, took the initiative. In early 1865 it proposed to France a monetary conference, whose negotiations led to the convention signed in Paris on 23 December 1865 by France, Belgium, Italy and Switzerland.⁴ Switzerland was represented, among others, by Johann Konrad Kern, its minister in Paris, together with the Aargau industrialist and politician Carl Feer-Herzog. Greece joined in 1868. The union adopted bimetallism with a gold–silver ratio of 1 to 15.5 on the basis of the French franc, with the member states striking their full-value coins at 900 thousandths fineness. Membership integrated Switzerland firmly into the French monetary sphere.⁵

The core of the convention was a common standard for coins. Gold coins of five, ten, twenty, fifty and one hundred francs and the silver five-franc piece were struck to identical specifications and were accepted by the public treasuries of all member states. The subsidiary silver coins, from two francs down to twenty centimes, were struck at 835 thousandths fineness, following an Italian precedent of 1862. Their issue was limited to six francs per inhabitant. The treasuries of each state accepted the subsidiary coins of the other members up to a certain amount, but the obligation to redeem them lay with the issuing state.⁶

A detail from the negotiations deserves attention. Willis reports that the Swiss delegates formally demanded a single gold standard and supported Belgium against France’s preference for the double standard.⁷ The Swiss had drawn the lesson of the 1850s: in a world of changing relative prices, a fixed ratio between two metals was a source of instability, which made a currency firmly anchored in gold appear the more solid option. The Swiss position failed in 1865, yet it anticipated the direction in which the international monetary system was moving.

The silver problem and the long decline of the union

The weakness of the union soon became apparent. After Germany adopted the gold standard in 1871 and began to sell its silver, the market price of silver fell sharply. Under a bimetallic system, silver now became the overvalued metal, which made it profitable to buy silver on the market, have it struck into five-franc pieces and exchange them for gold. The members responded by restricting the minting of silver coins in the 1870s and ceased it altogether from about 1880.⁸ The union thus became a limping standard: gold was the effective standard, while the existing silver five-franc pieces remained legal tender at their nominal value although their metal content was worth considerably less. The convention was renewed on 5 November 1878.⁹

The second problem was the fiscal discipline of the members. Italy in particular financed deficits with paper money, which drove its silver coins abroad, often into Switzerland and France. Over decades, the union had to organise the repatriation and withdrawal of Italian subsidiary coins. Between 1879 and 1894 Italy progressively withdrew its subsidiary coins from the other states, where their import was later prohibited.¹⁰ Switzerland, a small open economy with a sound fiscal position, was particularly exposed to an influx of the coins of weaker members, a problem that foreshadowed the difficulties of monetary unions without fiscal union in later periods.¹¹

Switzerland began striking its own gold coins in 1883, with twenty-franc pieces, followed by ten-franc pieces in 1911 and a one-hundred-franc piece in 1925.¹² The First World War shattered the system. Once the belligerents had suspended convertibility and paper money had depreciated, the fixed parities between the member currencies became fictitious. In June 1920 Switzerland prohibited the import of French subsidiary coins, and at the end of 1920 foreign silver five-franc pieces lost their legal tender status in Switzerland with effect from 31 March 1921. On 22 January 1926 Belgium gave notice of withdrawal.¹³ The union was formally dissolved at the end of 1926, and between 8 February and 31 March 1927 the gold coins of the other former member states were withdrawn from circulation in Switzerland.¹⁴ From 1 April 1927 only Swiss coins remained legal tender in Switzerland.¹⁵ The numismatic chronicle of the union observes that Switzerland alone remained true to the old franc after the war.¹⁶

What the union meant for Switzerland

The Latin Monetary Union is often cited as a precursor of European monetary union. The Zurich museum publication makes the point explicitly, calling it a forerunner of the euro by some one hundred and fifty years.¹⁷ For Switzerland it had three lasting effects. First, it gave the small Swiss currency the backing of a large monetary area for sixty years, which facilitated trade and the circulation of capital with France, Belgium and Italy. Second, it confronted Swiss monetary authorities, long before the existence of a central bank, with the practical problems of monetary co-operation: the Gresham effects of fixed ratios, the problem of fiscally weaker partners and the difficulty of withdrawing from a union. Third, the end of the union showed that a small country that kept its own house in order could emerge from the monetary chaos of the war and post-war period with its currency intact. The franc’s later reputation as a stable currency was grounded in this experience. By 1929 the franc was legally defined as 290 milligrams of fine gold, a definition that held until the devaluation of September 1936.¹⁸

Notes

1. HLS, Sandro Guzzi-Heeb, “Lateinische Münzunion”, http://www.hls-dhs-dss.ch/textes/d/D13662.php. ↩
2. Swiss National Bank, “Chronicle of monetary events”, entry for 31 January 1860, https://www.snb.ch/en/the-snb/organisation/history/geld-und-waehrungspolitische-chronik. ↩
3. Henry Parker Willis, A History of the Latin Monetary Union (Chicago, 1901), chapters on the origins of the Union, http://www.numisbel.be/Willis.htm. ↩
4. Willis, A History of the Latin Monetary Union, http://www.numisbel.be/Willis.htm; the date is also given by Swiss National Bank, “Chronicle of monetary events”, entry for 23 December 1865, https://www.snb.ch/en/the-snb/organisation/history/geld-und-waehrungspolitische-chronik. ↩
5. HLS, Sandro Guzzi-Heeb, “Lateinische Münzunion”, http://www.hls-dhs-dss.ch/textes/d/D13662.php. ↩
6. Münzen Eppler, “Die Lateinische Münzunion (Chronik 1865–1927)”, https://www.muenzeneppler.ch/numismatik/infos/lateinischen-muenzunion-chronik-1865-1927.html. On the 835 fineness and the Italian precedent see Willis, A History of the Latin Monetary Union, http://www.numisbel.be/Willis.htm. ↩
7. Willis, A History of the Latin Monetary Union, section on the conference of 1865, http://www.numisbel.be/Willis.htm. ↩
8. HLS, Sandro Guzzi-Heeb, “Lateinische Münzunion”, http://www.hls-dhs-dss.ch/textes/d/D13662.php. ↩
9. Münzen Eppler, “Die Lateinische Münzunion (Chronik 1865–1927)”, https://www.muenzeneppler.ch/numismatik/infos/lateinischen-muenzunion-chronik-1865-1927.html. ↩
10. Münzen Eppler, “Die Lateinische Münzunion (Chronik 1865–1927)”, https://www.muenzeneppler.ch/numismatik/infos/lateinischen-muenzunion-chronik-1865-1927.html. ↩
11. Wikipedia (English), “Latin Monetary Union”, https://en.wikipedia.org/wiki/Latin_Monetary_Union, on France and Italy printing banknotes to fund their own endeavours, thereby “forcing other members of the union to bear some of the cost of its fiscal extravagance”; Münzen Eppler, “Die Lateinische Münzunion (Chronik 1865–1927)” (cited above), for the entry of 1894: “Die Einfuhr der italienischen Silberscheidemünzen wird bei Strafe der Konfiskation verboten.” The comparison with later monetary unions is an interpretation. ↩
12. Numis-Post, “Schweizer Münzwesen im 19. und 20. Jahrhundert”, https://www.numis-online.ch/service/schweizer-muenzwesen/19.-und-20.-jahrhundert.html. ↩
13. Münzen Eppler, “Die Lateinische Münzunion (Chronik 1865–1927)”, https://www.muenzeneppler.ch/numismatik/infos/lateinischen-muenzunion-chronik-1865-1927.html. ↩
14. Swiss National Bank, “Chronicle of monetary events”, entries for 31 December 1926 and 8 February–31 March 1927, https://www.snb.ch/en/the-snb/organisation/history/geld-und-waehrungspolitische-chronik. ↩
15. HLS, Sandro Guzzi-Heeb, “Lateinische Münzunion”, http://www.hls-dhs-dss.ch/textes/d/D13662.php. ↩
16. Münzen Eppler, “Die Lateinische Münzunion (Chronik 1865–1927)”, concluding remarks, https://www.muenzeneppler.ch/numismatik/infos/lateinischen-muenzunion-chronik-1865-1927.html. ↩
17. MünzenWoche, “Einleitung ‘Die Zürcher und ihr Geld’ Teil 2”, https://neu.muenzenwoche.de/nationen/einleitung-die-zuercher-und-ihr-geld-teil-2/. ↩
18. HLS, Bernard Degen, “Franken”, http://www.hls-dhs-dss.ch/textes/d/D13671.php. The article gives the post-devaluation range of 190–215 milligrams of fine gold. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.