lundi 16 mars 2015
No, a parallel currency is not the answer to Greece's problems
Posted on 23:51 by nice news
There is a theory running through financial circles that claims to offer Greece a get-out-of-jail-free card to its current problems and avoid the country being forced out of the single currency. The idea is fairly simple: Greece needs to launch a parallel currency alongside the euro so that it has the money to get its unemployed citizens back to work.
There's only one problem — it's bound to fail.
To understand why you need to look at what launching a parallel currency would actually mean in practice. Here's Wolfgang Münchau in the Financial Times today (emphasis added):
I would advise against a cold turkey switch into a new currency regime — one that would replace the euro with a new drachma. I doubt this is logically feasible or economically desirable. I would opt for a transitory regime, a smoke-and-mirrors version where nobody knows precisely whether Greece is in or out.
My preferred choice would be a parallel currency that acts as a medium of exchange but not necessarily as a store of value or unit of account. Its denomination would be the euro. This pseudo-currency would not be legal tender. Its success would depend on whether people accepted it. Its sole function initially would be to provide temporary liquidity if the country were to be cut off from central bank funding.
As Münchau admits, though launching a fully independent currency, a so-called "new drachma", may not it
There's only one problem — it's bound to fail.
To understand why you need to look at what launching a parallel currency would actually mean in practice. Here's Wolfgang Münchau in the Financial Times today (emphasis added):
I would advise against a cold turkey switch into a new currency regime — one that would replace the euro with a new drachma. I doubt this is logically feasible or economically desirable. I would opt for a transitory regime, a smoke-and-mirrors version where nobody knows precisely whether Greece is in or out.
My preferred choice would be a parallel currency that acts as a medium of exchange but not necessarily as a store of value or unit of account. Its denomination would be the euro. This pseudo-currency would not be legal tender. Its success would depend on whether people accepted it. Its sole function initially would be to provide temporary liquidity if the country were to be cut off from central bank funding.
As Münchau admits, though launching a fully independent currency, a so-called "new drachma", may not it
No, a parallel currency is not the answer to Greece's problems
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