Scandinavian Monetary Union
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The Scandinavian Monetary Union (Swedish: Skandinaviska myntunionen, Danish: Skandinaviske møntunion, Norwegian: Skandinaviske myntunion) was a monetary union formed by Sweden and Denmark on May 5, 1873 by fixing their currencies against gold at par to each other. Norway, which was in union with Sweden, however with full inner autonomy, entered the union two years later, in 1875 by pegging its currency to gold at the same level as Denmark and Sweden, 2.48 kn. (kroner/kronor) per gram of gold, or roughly .403 grams/kn.[1]An equal valued krone/krona of the monetary union replaced the three legacy currencies at the rate of 1 krone/krona = ½ Danish rigsdaler = ¼ Norwegian speciedaler = 1 Swedish riksdaler. The monetary union was one of the few tangible results of the Scandinavian political movement of the 19th century.
The union provided fixed exchange rates and stability in monetary terms, but the member countries continued to issue their own separate currencies. Even if 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.
Upon acceding to the union Sweden had the name of its currency changed from Riksdaler Riksmynt to Swedish krona. The Danish krone was already the name of the Danish currency[citation needed] and when Norway joined they also had a Norwegian krone.[citation needed] The word "krone" literally means "crown", and the differences in spelling of the name represent the differences between the Scandinavian languages.
In 1905 the political union between Sweden and Norway was dissolved, but this did not affect the basis for co-operation in the monetary union. It was instead the outbreak of World War I in 1914 that brought an end to the monetary union. Sweden abandoned the tie to gold on August 2, 1914 and without a fixed exchange rate the free circulation came to an end.
All three countries still use the same currencies as during the monetary union, but they lost their peg, one to one, in 1914. The Icelandic króna is a derivative of the Danish krone, established after Iceland was elevated to a separate kingdom in union with Denmark in 1918. Iceland cut its ties to Denmark in 1944 and became a republic.