The Luxembourg franc: from 1854 coins to the euro

For nearly a century and a half, Luxembourg lived with its own franc, tied to the Belgian currency and without a central bank of its own until 1998. Its history mirrors the country's shifting economic alliances.

A currency born late

Several currencies circulated in Luxembourg before the franc. The franc germinal kept its legal tender until 1825, the Dutch florin arrived in 1815, and after the country joined the Zollverein in 1842, the Prussian thaler became the main currency, while the Belgian franc remained the unit of account. A law of 1849 introduced the franc as the official currency for all administrative acts. In 1854, the State issued its first coins, struck in billon and with limited legal tender, making it the first Luxembourg issuing authority. Banknotes came two years later from the Banque Internationale à Luxembourg, created in 1856 with the privilege of issuing notes in francs, florins and thalers. A Banque Nationale founded in 1873 also printed notes, but went bankrupt in 1881.

Had we still had a national currency, Luxembourg would have been hit much harder.

Anchored to Belgium

A law of 1914 gave legal tender to the BIL's notes. After Luxembourg left the Zollverein in December 1918, a grand-ducal decree used the term "Luxembourg franc" for the first time. The economic union convention signed with Belgium in 1921 brought the two currencies closer, and a law of 1929 set their exchange rate at one to one. When Belgium devalued in 1935, the rate moved temporarily to 1.25 Belgian francs for one Luxembourg franc, and a monetary convention allowed the National Bank of Belgium to open a branch in Luxembourg. War then broke the sequence, as the German occupier carried out a currency exchange after 4 February 1941. A grand-ducal decree signed in London on 14 October 1944 restored the franc, valuing Reichsmark claims at five francs each, and parity with Belgium returned after the liberation.

Towards a central bank and the euro

The Belgian link carried a cost. Overnight on 21 to 22 February 1982, the Belgian franc lost 8.5% of its value, dragging the Luxembourg franc down with it. Prime Minister Pierre Werner told the Chamber of Deputies that “the devaluation left a bitter taste among Luxembourgers”. A law of 20 May 1983 created the Institut Monétaire Luxembourgeois, to which the State handed its right of issue, and on 1 June 1998, the institute became the Banque centrale du Luxembourg. Seven months later, on 1 January 1999, the conversion rate was irrevocably fixed at 40.3399 francs for one euro. Euro notes and coins arrived on 1 January 2002, and the franc lost its legal tender on 28 February 2002.

This article was written by artificial intelligence and reviewed by our editors.