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Concept
Scandinavian Monetary Union
Summary
NOTOC
The Scandinavian Monetary Union was a monetary union formed by Denmark and Sweden on 5 May 1873, with Norway joining in 1875. It established a common currency unit, the krone/krona, based on the gold standard. It was one of the few tangible results of the Scandinavian political movement of the 19th century. The union ended during World War I.
The original Scandinavian currencies were based on the silver Reichsthaler, defined by the Hamburg Bank as 25.28 grams fine silver, which was equal to one Norwegian speciedaler or two Danish rigsdaler. Sweden's riksdaler specie was slightly heavier at 25.5 g and was equal to four Swedish riksdaler riksgalds.
The Scandinavian switch to the gold standard was triggered by Germany's adoption of the German gold mark in 1873 and of the consequent disturbance in the silver market. The monetary union established the gold krone (krona in Swedish) replacing the legacy currencies at the rate of 1 krone = 1 Swedish riksdaler = Danish rigsdaler = Norwegian speciedaler = Hamburg reichsthaler. The latter's conversion to 4.50 German gold marks (hence, 1 krone = 1.125 marks) established the gold parity of the krone: one gram of fine gold worth 2.79 marks was equivalent to 2.48 krone (or 0.4032 g gold per krone).
The British pound (the "world currency" of the time) was equal to 18.16 kroner, and the franc of France and the Latin Monetary Union was worth 0.72 krone. Sweden's long-established tradition of using paper currency eased the implementation of a Gold Exchange Standard wherein gold coins rarely circulated but the respective central banks (the Sveriges Riksbank, Danmarks Nationalbank and Norges Bank) centralized their respective gold reserves and guaranteed the conversion of krone banknotes to gold for export purposes.
The union provided fixed exchange rates and stability in monetary terms, but the member countries continued to issue their own separate currencies. Although not initially foreseen, the perceived security led to a situation where the formally separate currencies were accepted on a basis of "as good as" the legal tender virtually throughout the entire area.
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