Yugoslav krone

 

 

Kingdom of Serbs, Croats and Slovenes 4 krone on 1 dinar note

In the final days of World War I, Austria-Hungary disintegrated and its former territories that were mostly inhabited by South Slavs were organised into the short-lived State of Slovenes, Croats and Serbs. On 1 December 1918, this new state became a part of the Kingdom of Serbs, Croats and Slovenes through its unification with the Kingdom of Serbia that was proclaimed by Prince Regent Alexander of Serbia, who assumed considerable powers. Alexander then appointed the country's first prime minister; he also authorised government minister Albert Kramer to draw up the list of members of the Temporary National Representation, the new state's provisional legislative body, without input from relevant political parties.^[1] At the time the kingdom was established, several currencies were in circulation in its territory; the Serbian dinar was in circulation in the former Kingdom of Serbia, and in some areas of Banat, Bačka and Baranja;^[2] and the Austro-Hungarian krone was in circulation in that empire's former territories.^[3][4] Some krone notes were circulated in Serbia since its wartime occupation. At the time, the population was required to exchange the Serbian dinar for the Austro-Hungarian krone as the occupation currency, but the requirement was generally avoided so the amount in circulation there was relatively low.^[5]

The repayment of war bonds issued by Austria-Hungary during the war was affecting the value and stability of the Austro-Hungarian krone. The newly established states in the empire's former territories said they would not honour any debts arising from the bonds. Austro-Hungarian Bank honoured claims under the bonds without exception by printing the required amounts of krone banknotes, increasing the supply of currency and thus inflation.^[6] In late 1918, the SCS finance minister Momčilo Ninčić sent a committee (Milko Brezigar, Velizar Janković [sr], and Milan Marković) to Vienna and Budapest to find out if it was possible to stop the printing of the Austro-Hungarian krone. They also visited Prague, where the KSCS planned to order the printing of its new currency. The governor of Austro-Hungarian Bank Ignaz Freiherr Gruber von Menninger told the committee printing would continue to avoid fuelling a potential Bolshevik uprising in the Republic of German-Austria.^[7] The Treaty of Saint-Germain-en-Laye, which ended the war with German-Austria, was interpreted as stipulating Austro-Hungarian successor states would have to redeem Austro-Hungarian krone notes circulating in their territory, although the relevant wording was not very clear.^[8]

 

 

Kingdom of Serbs, Croats and Slovenes 80 krone on 20 dinar note

In December 1918, the National Council of Slovenes, Croats and Serbs, the body formally administering the former Austro-Hungarian territories within the new kingdom, started to examine ways to remove the Austro-Hungarian krone from circulation. In late 1918, Ivo Belin proposed replacing krone with dinar at par (1:1). Belin proposed the stamping of Austro-Hungarian krone notes in circulation in the country to prevent an influx of notes from other former Austro-Hungarian territories. He proposed the stamped notes should be quickly replaced by a provisional currency, which would then be replaced by dinars issued by the national bank. Belin expected the former Austro-Hungarian territories within the new kingdom to cover the cost of replacement operations. Later government plans for the currency exchange were similarly formulated, so it is likely Belin's thinking influenced them.^[9]

After it was determined the Austro-Hungarian krone would continue to be printed, the KSCS government ordered the stamping of krone notes circulating in the country; this decision was adopted on 12 December 1918. The order prohibited any inflow of currency exceeding 1,000 krone and all exports of krone. The move was designed to determine the amount of the currency in circulation in the kingdom while creating a separate currency, thereby preventing any currency union in the former Austro-Hungarian lands.^[7] There was talk of currency union at the time but it was regarded as unlikely.^[10]

Stamping was completed by 31 January 1919. It was carried out by authorities including the Ministry of Finance, commercial and savings banks, tax authorities, district and municipal government offices, military bodies, and numerous other authorised and unauthorised bodies, using rubber stamps.^[11] Various types of rubber stamps of different shapes, and inks of varying colours, were used. Stamps were applied to several areas of krone notes, and had diverse contents in several languages, including German, Hungarian, and Italian.^[12] This led to public perception the stamping was poorly managed, and the stamps used were easy to counterfeit.^[11] Insignificant amounts of Austro-Hungarian krone notes were smuggled into the KSCS in expectation of a more favourable exchange than elsewhere.^[13] Overall, 5.323 billion krone were stamped.^[14] The overstamped notes were 1912 Austro-Hungarian krone in denominations of 10, 20, 50, 100, and 1,000 krone.^[15]

The stamping of krone banknotes in the KSCS led the government of German-Austria to consider stamping Austro-Hungarian krone in circulation there. German-Austria expected the KSCS might withhold a portion of the notes in the process of stamping. Those notes could then be taken out of circulation and used to buy assets in German-Austria using bad money, driving up prices. In early February, Czechoslovakia, another successor-state of Austria-Hungary, started stamping its krone notes, further giving weight to arguments by Ludwig von Mises, who successfully advocated the stamping of krone notes in German-Austria, which started stamping notes in February 1919.^[16]

In addition to rubber stamping, most krone notes were tagged using special adhesive stamps. The one-hundred-million stamps and accompanying receipt forms were printed in Vienna in exchange for three railroad goods wagons—two loaded with flour and one carrying bacon. The tagging encompassed rubber-stamped krone notes except 10 krone and smaller notes, which were exempt.^[17] The tags used on 10, 20 and 50 krone notes were bilingual in Serbo-Croatian and Slovene, while those on the 100 and 1,000 krone notes could have been in any recognized language and either Latin or Cyrillic script.^[18] Tagging was completed between 26 November 1919 and 11 January 1920.^[19] The Ministry of Finance reported 4.6 billion krone were tagged; the National Bank of Yugoslavia later said almost 5.7 billion krone were tagged. The tagging was likely motivated by financial reasons; 20% of the amount tagged was withheld as compulsory five-year loan to the government, yielding a one percent annual interest. The loan was not repaid in cash; its terms were modified several times until 1930, when it was determined the receipts may be used to pay taxes or fines. The public perceived this compulsory loan as confiscation.^[17] The withheld notes were immediately returned to circulation by the government.^[20]

 

 

Kingdom of Serbs, Croats and Slovenes 4000 krone on 1000 dinar note

There were conflicting views on the rate at which the stamped-and-tagged krone notes would be exchanged for the new currency. In Serbia, there were calls for the withdrawal of the krone notes with no compensation. These calls were based on assertions the krone was enemy money that was used to cause destruction and death in Serbia. Some politicians originally from the territories formerly belonging to Austria-Hungary, including Nikola Winterhalter, Vitomir Korać, Janko Šimrak, and Ivan Ancel, shared this view. The government rejected this approach on the basis it would wipe out the private financial property of a large part of the population, it could cause an economic crisis, and would be politically problematic.^[21] The stamping of krone notes largely removed fears the krone would be abolished without compensation.^[14] There were proposals for application of various conversion rates of krone and Serbian dinar to the new currency, ranging from exchange at par to an exchange rate of ten krone to one dinar.^[22] The government-defined exchange rate changed over time from two krone to one dinar in late October 1918, to three krone to one dinar in mid-1919, and four krone to one dinar on 1 January 1920. The exchange rate established in 1920 was defined as the rate of the actual exchange.^[23] This rate was used, in a limited extent, to exchange krone for dinars in parts of Bačka, Banat and Baranja, where both currencies were in circulation even before the official swap.^[2]

 

 

Kingdom of Serbs, Croats and Slovenes 2 krone on 1⁄2 dinar note

In 1919, during the period between the stamping and tagging of krone notes, finance minister Ninčić created a plan to introduce an interim currency that called for the state to directly issue the currency rather than it being issued by a national bank. This was because the KSCS had not yet legislated a national bank into existence and Ninčić wanted to avoid excessive delays in replacing krone notes. According to his plan, the national bank would later issue a more-permanent currency in place of the provisional one. The KSCS government decided to introduce a KSCS dinar and on 1 February 1919, it ordered the printing of 3.5 billion dinars in Paris. The printing was delayed by a lack of printing capacity, causing the government to hire additional suppliers in Prague and Zagreb. Shortages of ink, paper and spare parts, a governmental collapse, and the replacement of Ninčić with Vojislav Veljković [sr] caused further delays. By September, only one billion dinars were printed. By November, this had increased to 2.1 billion but only 800 million were actually delivered. When it became clear the exchange could not take place before May 1920, Belin unsuccessfully proposed exchanging krone with Serbian dinars, which could be obtained more quickly, instead of KSCS dinars.^[24] The National Bank of Serbia returned to Belgrade from its wartime seat of Marseilles in February 1919. Shortly afterwards, the government proposed legislation transforming the National Bank of Serbia into the central bank of the KSCS that would issue the KSCS dinar. The change involved issuing of additional shares of the bank, but the bank remained predominantly in Serbian ownership.^[25]

In January 1920, as the final decision on exchange of the krone notes was debated, Matko Laginja, the head of the Croatian Union—the largest Croatian political party in the Temporary National Representation—renewed calls for an at-par exchange. At the same time, prominent Slovene politician Gregor Žerjav conceded to the 4:1 krone-to-dinar exchange rate but requested the krone remain a legal currency within the KSCS. On 13 January, the government made the decision on the exchange, combining the two demands with its earlier position. The new provisional notes would be simultaneously issued in dinar and krone in the ratio of 4:1, and that each note would have a dinar amount and a four-times-higher krone amount. The government decision stated the exchange would be at par, but that was interpreted as meaning krone at par for krone and dinar at par for dinar. Thus, one stamped Austro-Hungarian krone was exchanged for one KSCS krone, and one Serbian dinar was exchanged for one KSCS dinar. Small-value (up to 10) krone notes were to remain in circulation, and government bodies would keep accounts in both dinar and krone. The national bank issued the joint dinar-krone notes ordered by the state in February 1919 as its own.^[26] The dinar-krone ("krone on dinar") notes were printed as dinar and overprinted with krone at the prescribed ratio. Denominations issued were 2, 4, 20, 40, 80, 400 and 4,000 krone on 1⁄2, 1, 5, 10, 20, 100 and 1,000 dinar.^[27] In total, 1.277 billion dinar were used for the exchange, which corresponds to 5.1 billion krone exchanged.^[28] The withdrawn krone notes were stored in the Petrovaradin Fortress until they were handed to German-Austria pursuant to a special agreement.^[29] The dinar-krone notes were gradually replaced in 1922 with new designs without krone denominations, causing dinar to remain sole legal tender in the KSCS by 1 January 1923.^[30]

The issue of the currency swap rapidly grew into a political question of whether Serbia plundered inhabitants of the former Austro-Hungarian territories within the KSCS.^[31] There were and still are conflicting views about the effects of the introduction of the Yugoslav krone and its exchange for KSCS dinar at the rate of 4:1.^[32] According to Serbian sources, there were no adverse economic consequences from the operation.^[33] Croatian historians such as Ivo Banac, Franjo Tuđman, and Ivo Goldstein; and Austrian-Croatian historian Alojz Ivanišević said the exchange ratio was unjustified. Their views correspond to the public perception in Croatia the currency swap was unjust or even malicious; this view has been present since 1920 .^[32] Public sentiment was the krone was intentionally depreciated and the Serbian dinar favoured.^[13] According to historian Marko Attila Hoare, the exchange caused a loss of 1.4 billion krone to the former Austro-Hungarian lands and increased Serbia's purchasing power at their expense.^[34]