« | Home | »

Double Currency

Tags: |

The problem is plain. If new loans to Greece are arranged, even at lower rates of interest, its debt will rise. If its existing loans are rolled over or sold, the rating agencies may declare default and jittery banks and other investors will expect more interest on new lending. But the solution this week involves a degree of both, in the hope that the compromise will not be too unpalatable to too many. The alternatives – for Greece to default completely and leave the Eurozone or for the zone to announce that it will move to a common fiscal and spending policy – are next to unimaginable.

The first would lead to gloom at the prospects for the other countries in difficulty in Europe (Ireland, Portugal, Spain and perhaps Italy), and it’s not clear that anyone could effectively help them all out. The second would remove discretion over fiscal policy and spending from every country in the zone and place a burden on the richest, above all Germany, which does so well from selling to the rest; it would also make it even plainer than it is now where the power in the Union lies, and cause no little discontent in the weaker members. It would be wild to suggest that it might disrupt the peace that was the point of the project in the first place, but the result would be a kind of empire, for which the dominant powers would not want to pay and the more subservient would not find it easy to.

As everyone agrees, this week’s compromise will be temporary. It will work until it doesn’t, and then there’ll be another. And maybe this is how things will be for a decade or more. But suppose it doesn’t. Suppose that those elsewhere, in London now for instance, who say that the time has come to face up to a ‘two-tier Europe’ in ‘greater union’, prove to be right. What would that mean for people’s daily lives in the weaker economies? The answer, obviously, is ‘austerity’: more unemployment, lower incomes, smaller pensions, less public spending. There simply wouldn’t be as many euros at their disposal as there have been in the years of easy lending.

In Russia after the end of the Soviet Union many people resorted to barter. Outside desperate situations, like that of Kosovars in Kosovo before 1999, baby-sitting circles, and small and settled communities such as those of the retired in parts of the United States, this isn’t easy to arrange. How do you know what there is to exchange and with whom? And how do you guarantee the transactions? There is after all a good reason for money and markets and credit.

But there is no reason why the euro should be the only currency in the Eurozone. Existing debts, of course, are denominated in it, and so is external trade. People’s wages would have to be paid in the first currency. Their savings would have to be in it too, especially if they were to be invested abroad. And there would have to be some reasonably inflation-proof cash for imports. But a lot of food, clothes, housing, public transport, even health and education, are internal goods. For them, a second currency could work. It wouldn’t have to be coupon-based like wartime ration books. It could be a free medium that people could use as they wished for activities that had no bearing on the country’s external standing. And it could stimulate people into work they might not otherwise have.

It would be open to abuse, of course. Banks would have one exchange rate for the euro and the street another. And it might inflate. But it’s not impossible to imagine how it could work, and to the extent that it did, it might be a political good. Politicians humiliated by the austerity forced on them in the second tier of a two-tier Europe run from Brussels and Berlin (with help of a kind from Paris) could at least claim that people have some ‘ownership’ of their lives, and a national currency has a certain symbolic standing. The Swiss manage something like this, though they are of course Swiss, and otherwise different.

Comments on “Double Currency”

  1. stevemerlan says:

    There are more than twenty regional currencies and semi-barter frameworks currently operating in Europe. I’m somewhat acquainted with one, Regiogeld, which is used by many of my friends in Bavaria (there are several varieties of Regiogeld, depending on the region.) There is a Wikepedia entry for it, and for German readers there’s a website, http://www.regiogeld.de.

    (Here’s their statement of principles, sorry I can’t do a translation in the time I have now)

    •Es bindet die Kaufkraft an die Regionen, fördert die regionalen Unternehmen und stimuliert regionale Wirtschaftskreisläufe.
    •Es erweitert die unternehmerischen Handlungs- möglichkeiten um einen regionalen Markt und ist als Werkzeug zur Regionalentwicklung einsetzbar.
    •Es hilft, regionale Produkte abzusetzen, neue Umsätze zu ermöglichen und Arbeitsplätze zu schaffen.
    •Regionales Wirtschaften verkürzt die Transportwege und schont die Umwelt

    The site emphasizes the regional and ecological character of a means of payment that doesn’t extend over the whole euro region, but is connected the euro for transactions that do extend beyond a locality.

    • flaneurben says:

      Helped (a lot) by Google Translate:

      • [Regiogeld] binds buying power to the regions, promotes regional firms and stimulates regional economic activity
      • It enhances the entrepreneurial potential of a regional market and is a tool for regional development.
      • It helps to sell local products, to enable new revenues and create jobs.
      • Regional economies shorten transport routes and protect the environment

Comment on this post

Log in or register to post a comment.

  • Recent Posts

    RSS – posts

  • Contributors

  • Recent Comments

    • name on Who is the enemy?: Simply stating it is correct doesn't make it so, I just wish you would apply the same epistemic vigilance to "Muslim crimes" as you do to their Hebrew...
    • Glen Newey on Unwinnable War: The legal issue admits of far less clarity than the simple terms in which you – I imagine quite sincerely – frame them. For the benefit of readers...
    • Geoff Roberts on The New Normal: The causes go back a long way into the colonial past, but the more immediate causes stem from the activities of the US forces in the name of freedom a...
    • sol_adelman on The New Normal: There's also the fact that the French state denied the mass drownings of '61 even happened for forty-odd years. No episode in post-war W European hist...
    • funky gibbon on At Wembley: If England get France in the quarter finals of Euro 16 I expect that a good deal of the fraternity will go out the window

    RSS – comments

  • Contact

  • Blog Archive

  • From the LRB Archive

    Edward Said: The Iraq War
    17 April 2003

    ‘This is the most reckless war in modern times. It is all about imperial arrogance unschooled in worldliness, unfettered either by competence or experience, undeterred by history or human complexity, unrepentant in its violence and the cruelty of its technology.’

    David Runciman:
    The Politics of Good Intentions
    8 May 2003

    ‘One of the things that unites all critics of Blair’s war in Iraq, whether from the Left or the Right, is that they are sick of the sound of Blair trumpeting the purity of his purpose, when what matters is the consequences of his actions.’

    Simon Wren-Lewis: The Austerity Con
    19 February 2015

    ‘How did a policy that makes so little sense to economists come to be seen by so many people as inevitable?’

    Hugh Roberts: The Hijackers
    16 July 2015

    ‘American intelligence saw Islamic State coming and was not only relaxed about the prospect but, it appears, positively interested in it.’

Advertisement Advertisement