Historical Sketch

The state tradition of France dates to the Frankish kingdoms of the 5th century. Since the 10th century, the kingdom was ruled by the Capetian dynasty and their direct successors Valois and Bourbon. The French Revolution of 1789 abolished the kingdom and replaced it with a republic. In 1799, Napoleon obtained dictatorial power and assumed the title emperor in 1804. The military defeat of 1813 triggered Napoleon’s fall in the following year and the re-establishment of the Bourbon monarchy, with a 100-days’ interlude when Napoleon tried to regain power. The 1848 revolution overthrew the kingdom, just to replace it by a restored empire under Napoleon’s grandnephew four years later. The defeat against Germany in 1870 led to the abolition of the monarchy for good, and France has been a republic since then. During World War II, France was defeated by Germany and partitioned into an occupied (under direct German rule) and an unoccupied part. The latte, so-called État Français (French State) of Vichy was subject to German suzerainty. The colonial empire, which France had built up since the 19th century, mostly remained loyal to the French government-in-exile which, together with the Allied powers, liberated France in 1944-1945. After the liberation, the state unity was restored.

Monetary History Overview

In 13th century France, the Pound of Tours (French: "Livre Tournois") became the unit of account of the French kings, replacing the older Pound of Paris (French: "Livre Parisis"). Both units of account ultimately go back to the Carolingian Pound of the 9th century. The Pound of Tours introduced under King Louis IX the Saint in 1266 corresponded to about 81.8 grams of fine silver and 8.3 grams of fine gold. Centuries of debasement reduced it to 4.5 grams of fine silver and 0.3 grams of fine gold in 1785. The "Franc" as coin unit dates back to the late 1360s when king John II the Good introduced a gold coin of this name.

In 1726, French coinage was thoroughly reformed after a long period of confusion. The so-called "Edict of Marly" redefined the French Livre and created two new base coins, a silver Thaler (Écu) of 6 Livres and a golden Pistol (Louis) of 24 Livres. In 1785 the gold-to-silver ratio was slightly lowered, otherwise the currency remained unchanged until the French Revolution. Payment in specie, however, was not the norm, as the government had begun issuing paper money which became more and more dominant throughout the 18th century. At the end of the monarchy the state finance was in disarray as state paper money was issued in large amounts. The revolutionary government of 1789 tried to avert the imminent bankruptcy with the help of new credit instruments backed by confiscated property (so-called "Assignats"), but until 1796, they had lost their value almost completely. In August 1795, the revolutionary government changed the unit of account to the 1st French Franc in silver (so-called "Franc Thermidor" after the month of the revolutionary calendar). The weight was expressed in the new metrical units and only about 1‰ lighter than that of the Livre. In February 1800, the Bank of France began operations. Paper money issuance was, however, negligible throughout the 19th century due the bad experience with this means of payment in the past. The coinage law of March 1803 brought back bimetallism (of the so-called "Franc Germinal"), gold and silver coins were issued in a weight ratio of 15½, which set the model for European coinage in the 19th century and also became the basis of the 1865 Latin Monetary Union. The coinage union harmonized specie to the French model and promoted the cross-border circulation of coins, which meant that French coins were current in all the member states, in some countries even dominating the payment transactions. In the 1880s, the metal prices had changed to an extent that the fixed gold-to-silver ratio could no longer be maintained, so that France and the Latin Monetary Union abandoned bimetallism in favour of the gold standard. The First World War brought this to an end, the gold standard was suspended everywhere and could not be revived in the immediate aftermath. The Latin Monetary Union nominally existed until 1926. The post-war economic crisis in France delayed the currency stabilisation until 1928. The newly defined gold peg (of the so-called "Franc Poincaré", after the French finance minister of that time) could, however, be maintained only for a few years. In the crisis of the 1930s the gold standard was de facto suspended, although it nominally remained until the German occupation. During wartime, the French Franc was pegged to the German Reichsmark but remained in circulation in both the occupied and unoccupied parts. Allied liberation brought an immediate exchange of paper money in mid-1945, in which the wartime cash surplus was partially confiscated. In December 1945, the Franc got pegged to the Pound Sterling. Stabilization was, however, not achieved, and the French currency got devalued by 66% in two steps until 1949. Then the Franc also repegged to the US Dollar. In July 1958, another 17% devaluation was done, and in December of the same year, a currency reform was carried out. Two zeros were cut, and the 2nd French (New) Franc became the new unit. The value was reduced by another 15%, and the new currency repegged to gold. In 1969, another 11% devaluation was done, and in 1971 the gold peg was finally abandoned, and the exchange rate began to float. France joined the European currency system and became a founding member of the European Monetary Union. It has introduced the European Euro in 1999. The French banknotes and coins were withdrawn in 2002.

France joined the International Monetary Fund (IMF) on 27.12.1945 as a founding member.

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