mercredi 8 avril 2015
This unorthodox plan may keep Greece in the eurozone
Posted on 09:52 by nice news
The idea has been bandied about for years by economists who fear a Greek exit from the euro could trigger a global financial crisis.
To create the fiscal flexibility that Greece’s economy so sorely needs to reinvigorate economic growth, meet its debt payments and, ultimately, stay in the eurozone, the Greek government could adopt what economists at the Levy Institute call a “parallel financial system” that would allow the government to make payments without using hard currency.
Simply stated, this would be an IOU.
The idea received a lot of attention in February, after the Financial Times’ Wolfgang Münchau called it the “second best option” for Greece, should its creditors refuse to abandon what he referred to as “the failed policies of the past five years.”
As Greece appears to be hurtling toward insolvency, and an exit from the eurozone is back on the table, here’s how the IOU plan — which would allow Greece to increase government spending without further burdening itself with interest-accruing debt — might work.
According to Robert Parenteau, a research associate at the Levy Economist Institute of Bard College who wrote a blog post advocating the IOUs — or “tax anticipation notes,” as he termed them — they would have a few defining characteristics:
The IOUs would have an interest rate of zero.
They would be perpetual bonds with no date of maturity that would require the Greek government to repay the principal.
They would be transferable — just like bearer bonds.
Holders of the bonds could use them to pay taxes, with an accepted value of parity with the euro.
To create the fiscal flexibility that Greece’s economy so sorely needs to reinvigorate economic growth, meet its debt payments and, ultimately, stay in the eurozone, the Greek government could adopt what economists at the Levy Institute call a “parallel financial system” that would allow the government to make payments without using hard currency.
Simply stated, this would be an IOU.
The idea received a lot of attention in February, after the Financial Times’ Wolfgang Münchau called it the “second best option” for Greece, should its creditors refuse to abandon what he referred to as “the failed policies of the past five years.”
As Greece appears to be hurtling toward insolvency, and an exit from the eurozone is back on the table, here’s how the IOU plan — which would allow Greece to increase government spending without further burdening itself with interest-accruing debt — might work.
According to Robert Parenteau, a research associate at the Levy Economist Institute of Bard College who wrote a blog post advocating the IOUs — or “tax anticipation notes,” as he termed them — they would have a few defining characteristics:
The IOUs would have an interest rate of zero.
They would be perpetual bonds with no date of maturity that would require the Greek government to repay the principal.
They would be transferable — just like bearer bonds.
Holders of the bonds could use them to pay taxes, with an accepted value of parity with the euro.
This unorthodox plan may keep Greece in the eurozone
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