Tuesday, 10 April 2018

Greece and monetary union: a parallel

On April 10th 1868, Greece joined the Latin Monetary Union which had been formed by France, Italy, Switzerland and Belgium in 1866. As Ben Chu explained in an Independent article of three years ago:
These "Latins" agreed to make their currencies freely interchangeable at a fixed exchange rate to facilitate trade and foster monetary stability.

Things went pear-shaped as they were to do in respect of European Monetary Union more recently:

"In no sense was she a desirable member of the league," wrote the historian Henry Parker Wills in 1901. "Economically unsound, convulsed by political struggles, and financially rotten, her condition was pitiable." [...] Greece's King George I thought that joining the currency bloc would help modernise the domestic economy and lower its cost of borrowing on the international credit markets. Yet once Greece was admitted into the LMU, things didn't change. Athens over-borrowed and was lax in collecting tax.

However, having been kicked out of the LMU, Greece made amends, as she was also to do, austerely, more recently:

Greece was re-admitted to the LMU in 1910 after managing an impressive turnaround in economic management.

 Of course, this was all to be swept away four years later in the war which was supposed to end all wars.

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