When the world gets closer.

We help you see farther.

Sign up to our expressly international daily newsletter.

Greece

Neither Euro, Nor Drachma: Could A New *Geuro* Currency Save Greece?

Top economists at Germany's Deutsche Bank suggest creating a second "parallel" currency, alongside the euro, to save Greece. They also believe Greek banks should be turned into a European-managed "Bad Bank," a

Still holding on, but the Greek crisis may be bound to end in drachma.. (dullhunk)
Still holding on, but the Greek crisis may be bound to end in drachma.. (dullhunk)
Sebastian Jost

BERLIN - Thomas Mayer is one of the highest-profile economists in Germany. Deutsche Bank's chief economist explains the euro crisis so clearly that anyone can understand all the moving parts. He calls a spade a spade, and tells the German taxpayers what the risks are. He also thinks outside the box.

And he just proved it again at the Welt Group and Stiftung Familienunternehmen (Family Business Foundation) conference on currencies -- a subject that has been preoccupying politicians and economists for months. The hot topic was: should Greece stay in the euro or re-introduce the drachma?

Mayer and his colleagues at Deutsche Bank have come up with a third option: introduce a brand-new second currency, alongside the euro, in Greece.

"The Greek government is soon going to be issuing IOUs to state workers," Mayer said at the Welt conference. "There's going to be a parallel circulation of promissory notes and euros." And he's already come up with a snappy term for the new parallel currency: the "Geuro."

A parallel currency

"I believe that the most probable development will be a currency that circulates parallel to the euro," he said. This would for example make it possible for exporting firms to lower salaries so that they can do business again. And it would make it possible for a bankrupt government to honor its commitments.

"It's not likely that Greece will formally leave the euro, or that other euro countries will turn away from Greece completely," the Deutsche Bank economists write in their report.

The "path of least resistance" could, following electoral victory of radicals in Athens, mean stopping payments for running budget expenses and only paying money Greece needs to service its debts. And if that were to happen, "there could be a parallel currency to the euro," the study says.

According to Mayer, Athens could kill two birds with one stone by handing out IOUs . On the one hand, a departure from the euro could be avoided. On the other hand, a de facto adjustment of the exchange rate would become possible. "At first, the result could be massive devaluation," says Mayer, but the government could then stabilize the country with structural reforms thus keeping the door open for a complete return to the euro.

A European-led "Bad Bank"

However, even with this scenario Greece could only survive economically if failed Greek banks were turned into a European-managed "Bad Bank."

This would enable them to claim funds from the European Financial Stability Facility (EFSF) and thus to recapitalize.

According to the German economists, that maneuver could lead to new confidence on the part of many scared account holders who would return the savings they withdrew from the banks when the possibility of a departure from the euro loomed.

The creation of such a Bad Bank "would of course be costly," Mayer says, "but it would also reveal the true state of the economy" something that has been veiled by the European bailout funds and Central Bank intervention.

Greek banks are presently in large part dependent on emergency loans from its Central Bank. Many institutions are not eligible to receive funds from the European Central Bank because they don't have enough capital and aren't considered solid. According to Welt research, the volume of emergency loans in Greece now amounts to at least 75 billion euros.

The more Greeks close their bank accounts, the higher this amount climbs because the Central Bank is providing the missing resources to prevent banks from going under -- but it also means that the Bank is also presently financing further flight of capital from Greece.

Read the article in German in Die Welt.

Photo - dullhunk

You've reached your monthly limit of free articles.
To read the full article, please subscribe.
Get unlimited access. Support Worldcrunch's unique mission:
  • Exclusive coverage from the world's top sources, in English for the first time.
  • Insights from the widest range of perspectives, languages and countries
  • $2.90/month or $19.90/year. No hidden charges. Cancel anytime.
Already a subscriber? Log in

When the world gets closer, we help you see farther

Sign up to our expressly international daily newsletter!
Future

Injecting Feminism Into Science Is A Good Thing — For Science

Feminists have generated a set of tools to make science less biased and more robust. Why don’t more scientists use it?

As objective as any man

Anto Magzan/ZUMA
Rachel E. Gross

-Essay-

In the early days of the COVID-19 pandemic, a mystery played out across news headlines: Men, it seemed, were dying of infection at twice the rate of women. To explain this alarming disparity, researchers looked to innate biological differences between the sexes — for instance, protective levels of sex hormones, or distinct male-female immune responses. Some even went so far as to test the possibility of treating infected men with estrogen injections.

This focus on biological sex differences turned out to be woefully inadequate, as a group of Harvard-affiliated researchers pointed out earlier this year. By analyzing more than a year of sex-disaggregated COVID-19 data, they showed that the gender gap was more fully explained by social factors like mask-wearing and distancing behaviors (less common among men) and testing rates (higher among pregnant women and health workers, who were largely female).

Keep reading...Show less

When the world gets closer, we help you see farther

Sign up to our expressly international daily newsletter!
You've reached your monthly limit of free articles.
To read the full article, please subscribe.
Get unlimited access. Support Worldcrunch's unique mission:
  • Exclusive coverage from the world's top sources, in English for the first time.
  • Insights from the widest range of perspectives, languages and countries
  • $2.90/month or $19.90/year. No hidden charges. Cancel anytime.
Already a subscriber? Log in
Writing contest - My pandemic story
THE LATEST
FOCUS
TRENDING TOPICS

Central to the tragic absurdity of this war is the question of language. Vladimir Putin has repeated that protecting ethnic Russians and the Russian-speaking populations of Ukraine was a driving motivation for his invasion.

Yet one month on, a quick look at the map shows that many of the worst-hit cities are those where Russian is the predominant language: Kharkiv, Odesa, Kherson.

Watch VideoShow less
MOST READ