[2] By treaty dated 23 December 1865,[4] France, Belgium, Italy, and Switzerland formed the Latin Monetary Union.
[5] The LMU served the function of facilitating trade between different countries by setting the standards by which gold and silver currency could be minted and exchanged.
In this manner a French trader could accept Italian lire for his goods with confidence that it could be converted back to a comparable amount of francs.
[6] Austria-Hungary refused to join the LMU because it rejected bimetallism, but signed a separate monetary treaty with France on December 24, 1867 whereby both states agreed to receive into their treasuries one another's gold coins at specified rates.
[7] Austria-Hungary thereafter minted some but not all of its gold coins on the LMU standard, including the 4 and 8 florin, which matched the specifications of the French 10 and 20 francs.
[10] With the tacit agreement of Napoleon III of France, Giacomo Antonelli, the administrator of the Papal Treasury, embarked from 1866 on an ambitious increase in silver coinage without the prescribed amount of precious metal, equivalent to Belgium's total.
This is today recognized as an inevitable effect of a currency based on bimetallism when precious metal prices fluctuate.
[citation needed] According to the BBC, Greece with its "chronically weak economy meant successive Greek governments responded by decreasing the amount of gold in their coins,[b] thereby debasing their currency in relation to those of other nations in the union and in violation of the original agreement".
[19] According to the Financial Times, another major problem of the LMU was that it failed to outlaw the printing of paper money based on the bimetallic currency.
France and Italy exploited this weakness by printing banknotes to fund their own endeavours, effectively "forcing other members of the union to bear some of the cost of its fiscal extravagance by issuing notes backed by their currency".
[citation needed] The last coins made according to the standards (i.e., diameter, weight and silver fineness) of the Union were the Swiss half, one-franc, and two-franc pieces of 1967.