Volume II · After Gold · Money Research

04 — The Cold War Ends: New Nations, New Currencies and the Euro, 1989–2001

German reunification and the price of a 1:1 conversion

The Berlin Wall opened on 9 November 1989. The German monetary, economic and social union took effect on 1 July 1990, three months before political reunification, making the Deutsche Mark legal tender in the GDR. Its agreed terms converted wages, salaries, stipends, rents, leases, pensions and other recurring support payments at 1:1. GDR residents could convert cash and bank deposits at 1:1 only up to per-person caps of 2,000 GDR marks for children through age 14, 4,000 for ages 15–59 and 6,000 for age 60 and above; amounts beyond those caps were generally converted at 2:1. Consumer prices were not a blanket 1:1 conversion category: the union introduced free price formation. Bundesregierung, 2 May 1990 agreed conversion terms, items 2, 5–6; Bundesregierung, 18 May treaty and 1 July start chronology. Currency conversion, price liberalisation and transfers created adjustment pressures for East German industry and public finance, while German interest-rate policy mattered to other economies linked through the Exchange Rate Mechanism. The estimated transfer total, the stated German rate superlative and the conversion-to-ERM causal share require separate economic and Bundesbank series evidence; the legal conversion terms alone do not prove them.

The Soviet collapse: fifteen new states, fifteen new currencies

The Soviet Union dissolved on 26 December 1991 into fifteen republics. Several newly independent states continued to use the ruble in 1992–93. The Central Bank of Russia alone could issue ruble cash, while the national central banks in the shared area could expand credit by creating bank reserves. An IMF study says effective common credit rules were not established and coordination was weak; it identifies this as one source of inflationary pressure alongside economic deterioration and ineffective monetary-policy tools, not a “fifteen printers” system or a demonstrably fastest-possible inflation path. IMF, *Evolution of Monetary Policy Instruments in Russia*, §III.A, “Monetary Policy During the Ruble Area Period”. Russia removed most consumer-price controls on 2 January 1992 as part of its transition reforms. Separately, the IMF's overall consumer-price index shows a 2,508.8% rise from December 1991 to December 1992; this is an end-of-year CPI change, not the inflation rate on the liberalisation date or a calendar-average rate. IMF, *Russian Federation: Selected Issues*, Country Report 00/150, Table 15, “Percentage changes from December to December”. The rapid price rise sharply eroded the purchasing power of unadjusted ruble balances, though its effect on particular savings depended on returns and timing. In July 1993 Russia announced withdrawal of pre-1993 ruble notes, which further fragmented the shared currency area. IMF, *Evolution of Monetary Policy Instruments in Russia*, §IV.A.

The new currencies illustrate how states chose monetary arrangements after independence:

Estonia's kroon (June 1992) used a currency-board arrangement fixed to the Deutsche Mark and later joined the euro (2011). Latvia's lats and Lithuania's litas followed different paths. Ukraine used the karbovanets before introducing the hryvnia in September 1996; Kazakhstan, Kyrgyzstan, Uzbekistan, Belarus, Moldova, Georgia, Armenia, Azerbaijan, Turkmenistan and Tajikistan also introduced named currencies. Early inflation and stabilisation differed sharply among them. A claim that every currency lost most of its value in two years and adopted one common “Western model” requires comparable country-by-country series and legal records, which this chapter does not supply.

On 17 August 1998 Russia announced a restructuring of specified ruble-denominated short-term government securities due before the end of 1999 and widened its ruble-dollar exchange-rate corridor to 6–9.5 rubles per dollar. The ensuing market depreciation should be measured against a named exchange-rate series and date rather than called a two-thirds devaluation on announcement day. IMF, *IMF Survey*, 2 August 1999, de facto default scope; IMF, *IMF Survey*, 31 August 1998, reproduced Russian government/central-bank statement. Inflation and stabilisation did not switch at one oil-boom date: the IMF's overall CPI series reports 11.0% December-to-December inflation in 1997, 84.5% in 1998 and 36.6% in 1999. IMF, *Russian Federation: Selected Issues*, Country Report 00/150, Table 15. A separate source would be needed to quantify how oil revenues, policy and the currency reform contributed to later price stability. The effect of the 1995–96 “loans-for-shares” privatisations on ownership and politics also requires more than this monetary chronology to assess.

Central Europe, Yugoslavia and an extreme hyperinflation

Poland's Balcerowicz Plan, begun in January 1990, combined price liberalisation, exchange-rate policy, tighter monetary conditions and convertibility measures. Calling it the first or most successful post-communist stabilisation requires a defined country set, outcome and period. Czechoslovakia split into the Czech Republic and Slovakia on 1 January 1993, and the two states separated their currencies soon afterward. Hungary, Romania and Bulgaria followed different stabilisation paths; Bulgaria introduced a currency board in 1997 after severe inflation. The country-level dates, price paths and later recession comparisons need direct national or IMF series before ranking these cases.

Yugoslavia broke up in war from 1991 (“Wars, Invasions and Money, 1971–2026”). Slovenia (tolar, October 1991) and Croatia (dinar 1991, kuna 1994) left first; Bosnia's war (1992–95) ended with the Dayton Accords and a currency board (the convertible mark, 1998) administered under international supervision. The Federal Republic of Yugoslavia (Serbia and Montenegro), under UN sanctions and facing fiscal and monetary mismanagement, suffered extreme hyperinflation: the IMF reports that monthly inflation reached more than 300 billion per cent in January 1994. The IMF attributes the collapse to disrupted markets and production links, sanctions and macroeconomic mismanagement; this figure alone does not establish a global rank or a daily price-doubling interval. IMF, *Federal Republic of Yugoslavia: Membership and Request for Emergency Postconflict Assistance*, Country Report 01/07, para. 7 and Figure 1 note 2. Montenegro and Kosovo later used the euro without a formal arrangement with the European Community, unlike euro-area members. ECB, *Our money*, country-use note. Their distinct adoption dates and governing laws require local primary records; Kosovo's euro use should not be dated to its 2008 independence by inference.

Other independences and new currencies

After 1971, newly independent states and countries facing monetary crises chose different arrangements: a domestic currency, a peg, a currency union, or use of another country's money. Bangladesh introduced the taka; Namibia linked its dollar to the rand; East Timor adopted the U.S. dollar; Zimbabwe changed monetary arrangements repeatedly after severe inflation. These outcomes cannot be compressed into a rule that all new currencies hyperinflated. Ecuador and El Salvador adopted the U.S. dollar after crises. El Salvador later required Bitcoin acceptance under its 2021 law, then amended rather than repealed that law by Decree 199, adopted 29 January 2025 and effective 90 days after publication. Private acceptance became voluntary; the domestic statute retained “curso legal” wording even though the IMF described the essential legal-tender features as removed. Decree 199, arts. 1–8; IMF Country Report 25/58, para. 27 n.18. The country examples and figures elsewhere in this chapter still require country-level source checks.

The examples suggest that credible fiscal and monetary arrangements mattered, but no single choice of peg, currency board or central-bank statute guaranteed success. Comparing new currencies also requires the initial economic conditions and the period chosen for measuring price stability.

Maastricht, the ERM crisis and Black Wednesday (1992–93)

The Delors Report of 1989 laid out a three-stage path to European monetary union, and the Maastricht Treaty, signed on 7 February 1992 and in force from 1 November 1993, wrote it into law: a European Central Bank modelled on the Bundesbank, with price stability as its sole primary objective and a legal ban on financing governments, and "convergence criteria" — inflation, long-term interest rates, deficits below 3% of GDP, debt below 60% — that members had to meet to join. Britain and Denmark negotiated opt-outs.

The ERM linked participating European currencies within intervention bands, but economic conditions and interest-rate needs differed among countries. Sterling left the mechanism on 16 September 1992. The Bank of England raised its minimum lending rate to 12% and announced a planned 15% rate for the next day, which was never implemented. Bank of England, historical rate-series note (b). Following further pressure, finance ministers and central-bank governors widened the ERM's compulsory-intervention margins to ±15% in August 1993 while leaving central rates unchanged. A wider band was still a rule, not the end of all ERM rate coordination. European Monetary Institute, *Annual Report 1994*, 1993 ERM chronology. The scale of named speculators' positions, reserve losses, national recovery effects and a direct ERM-to-Bank-independence causal line require separate records.

The euro (1999–2002)

Eleven countries began the euro's shared monetary-policy stage on 1 January 1999, with irrevocably fixed conversion rates; Greece joined on 1 January 2001. Euro banknotes and coins entered circulation on 1 January 2002, replacing participating national cash at those conversion rates. ECB, *Our money*, introduction and country list; ECB, Greece accession release, 2 January 2001. As of September 2026 the ECB's country list includes Bulgaria, which joined in January 2026, for 21 euro-area members. Whether particular founding members used “creative accounting,” paused criteria or reached one common welfare outcome requires the relevant convergence reports and period-specific evidence.

The euro created a shared monetary policy for participating countries while national budgets and economic conditions still differed. It became a significant reserve and invoicing currency, but a rank or long-run share needs the named measure, denominator and date. Questions about shared fiscal capacity, sovereign-debt markets and crisis support became important during the eurozone crisis (“The Financial Crisis and the Age of Quantitative Easing, 2007–2019”); no single missing institution can be assigned the whole crisis from the chronology here. The former “largest event since Bretton Woods,” static 20% share and one-cause structural-flaw verdict are withheld pending matched historical and reserve data.

The independence wave

The decade brought a wider range of explicit monetary-policy frameworks. New Zealand announced an inflation target in 1990; Canada, Britain, Sweden and Australia followed in the early 1990s, with different target ranges and institutional arrangements. IMF, *Inflation Targeting: Holding the Line*, adoption table. Legal independence and inflation targeting spread at different speeds, while many countries retained exchange-rate pegs or other frameworks. A universal independent-central-bank, 2% target and floating-rate design did not exist by 2000; the Federal Reserve, for example, formally stated a 2% longer-run PCE inflation objective only in 2012. Federal Reserve, history of the formal target.

Key takeaways

The end of the Cold War created new states and currencies with very different stabilisation paths; Yugoslavia's 1994 hyperinflation was an extreme case, not the fate of nearly all of them. German reunification and the divergent needs of ERM members contributed to the 1992 exchange-rate crisis. Some central banks adopted inflation targets and gained greater independence, but those arrangements were not universal and target levels differed. IMF, adoption table.