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Greece: The two currency solution

There were two lessons learned last weekend in Greece - one is that Syriza is not going away - an...
Newstalk
Newstalk

12.43 6 Jul 2015


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Greece: The two currency solut...

Greece: The two currency solution

Newstalk
Newstalk

12.43 6 Jul 2015


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There were two lessons learned last weekend in Greece - one is that Syriza is not going away - and the second is that Greece wants to stay in the euro.

Latest polls say that as much as 70 percent of Greeks favour the country staying in the eurozone.

While a host of leading European politicians framed yesterday's referendum as a vote on eurozone membership - it's clear that this is not how the vote was interpreted in Greece.

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It's too early to get a read on whether Europe will bring a carrot or a stick to tomorrow's eurozone meetings. Conservative-European forces could follow through on their threats and refuse to engage in a meaningful way with the Greek Government, creating a greater squeeze in Greece in-spite of its renewed anti-austerity mandate.

If the country actually runs out of money, and cannot pay public servants and pensions the country could effectively launch a parallel currency in the form of new bonds which have a one to one value with the euro, and pay no interest.

This money could also be used to prop up the banks - but this is a dangerous situation to get into, and if it gets that far there's a good chance that it will be a short term measure as the country exits the eurozone.

Euro / drachma

Speaking to Russia TodayBernard Lietaer, one of the architects of the single currency said that he could see a two currency system as a more permanent solution:

"I don’t see any reason why Greece could not have two currencies: Be a participant in the euro for tourism and for shipping - which are the largest sectors of the economy."

"At the same time, have some new drachma, which is playing by different rules and which is providing capacity to reanimate the economy at the grassroots level, a lot easier than what happens with the euro now," he continues.

In May German Finance Minister, Wolfgang Schaeuble who has become a poster-boy for the enforcement of European austerity also raised the prospect of a a second currency as a possible solution.

It is worth noting that these comments were leaked from a private meeting by Bloomberg sources who could not be be named, and he only discussed it as a possibility - he was not endorsing the idea.

Going crypto?

An April Fools story by the Greek Reporter suggested that the country might turn to bitcoin as a possible solution.

In February of last year Yanis Varoufakis did actually publish a blog post about the possibility of a bitcoin-style crypto currency being used in the eurozone to fight deflationary pressures.

He proposes that, "the technology of Bitcoin, if suitably adapted, can be employed profitably in the Eurozone as a weapon against deflation and a means of providing much needed leeway to fiscally stressed eurozone member-states."

The now former-minister writes that financially troubled eurozone countries could, "create their own payment system backed by future taxes and denominated in euros. Moreover, they could use a Bitcoin-like algorithm in order to make the system transparent, efficient and transactions-cost-free."

 


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