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‘No Reason Why Greece Could Not Have Two Currencies’ – A Euro Architect

Today we still use an industrial age monetary construct while we have technologies to do things differently. Greece could create a precedent with a different way of addressing economic problems, says one of the architects of the euro, Bernard Lietaer.

Greece Euro Drachma

RT: You were one of the people who helped bring about the birth of the single currency. What has gone wrong in your opinion?

Bernard Lietaer: We didn’t just change the currency, we also changed the rules of the relationships between the central banks and governments and that was not part of the deal initially. This is something that was added at the moment when the euro was launched and was incorporated in other laws and treaties. But the technical part of the currency foundation – the convergent system which is the part I was involved in when I was at the central bank in Belgium, which had the responsibility for that particular phase, that was not what we expected; that had been added.

RT: Did you ever think it was possible a member state might leave the euro?

BL: Actually that was decided that it would not be an option. That was part of the political conditions that we were given at the moment of the design; there would be a one-way street and it was quite clear that that was supposed to be the objective. The ultimate objective, of course, was to create convergence on a political level and on an economical level in parallel. With these additional changes that were introduced – again politically – that has not happened. We are now in a place where I frankly never expected we would be.

RT: Do you think the very future of the euro as a currency is at risk here?

BL: There is a lot at risk because we are playing chicken on all sides, not just the Greek side, but also the European side and actually even the IMF side. So there seems to be uncertainty being fed by all parties in this game and uncertainty is not good for anything really, certainly not for the economy or for investments and economies. So yes, there is a concern that didn’t exist before.

RT: If Greece sets a precedent and leaves the eurozone, is there a danger others will follow?

BL: It would be a precedent that is not part of any treaty. We are outside of the framework. But personally, I don’t believe the choice that is being given is the appropriate choice. I think 100 percent in or 100 percent out is in fact a false dilemma. There are other solutions available and what’s strange is that they are never talked about publicly anywhere. 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.

So I think there is a third solution which is ‘let’s innovate’ and there are precedents for this. I know economic theory never has been assuming a possibility of having several currencies in parallel, but in practice we do. Switzerland has, for the last 80 years, has been using two currencies: the Swiss franc and a business-to-business currency, which is working in parallel and stabilizing the economy. We never talked about it but its working. In Britain, if you are a British company you can choose to have your balance sheets and your taxes paid in euro. So you can actually for all practical purposes be part of the eurozone and at the same time in a British pound economy. So these things exist.

RT: If these alternatives do exist why are they are not being offered to Greece?

BL: It would create a precedent for a very different way of addressing economic problems. We are basically dealing with either orthodoxy, in a classical way, or getting ready for the information age, because that’s what I believe is going to be needed and necessary and we are delaying the process. We are still using an industrial age monetary construct in a period where we have technologies to do things differently. Every Greek citizen has a mobile phone, or at least every family does, so one could create new ways of a payment system with dual currencies. And all that is possible. It has not been done before there is no reason not to do it now. It’s certainly better than what’s being debated.

The statements, views, and opinions expressed in this article are solely those of the author and do not necessarily represent those of EMerging Equity.

Courtesy of RT

About ETFalpha

Chief ETF Strategist & Co-Founder at EMerging Equity


4 thoughts on “‘No Reason Why Greece Could Not Have Two Currencies’ – A Euro Architect

  1. I’m amazed by the (no)answer of Mr Lietaer who was involved in the Euro construction. He is choosing the Swiss Franc and the British Pound as example of two international recognized currencies. In the present case with Greece it is absolutely not the same kind of situation regarding the current balance of the country and the position of a potential greek currency in the international money market. All countries excepted the US are working with 2 currencies: their currency and the USD. then I am not sure to really understand the explanation, because the USD was the international reserve currency but Euro is starting to be a second one even if European people don’t really understand this point and even if a lot of mistakes are included in the Euro system.
    The second point I wanted to mention is the political aspect of the situation regarding Europe (and not only the Eurozone) and the international situation in not so far countries (Syria, Irak …). Before to accept that Greece could leave Eurozone and then Europe we have to deeply think about that. It is not only a question of the name of a currency. Greece in or out, the price will be quite the same but not the consequences.


    Posted by Champ | July 5, 2015, 11:02 am
  2. What I continue to find of interest is the acknowledgement (agreed, very subtly) that the Euro was created on political and not fiscal factors (common policies). The mantra that the latter is far to difficult to reach due to the varying economies involved (political interests) only reinforces the need to apply them. Until that issue is resolved (correctly) we’ll continue to have the risk(s) resulting from national political interests, and effects such as the ones presently discussed.
    As regards not having considered the option of a country leaving the euro, I refer to the old adage of “rules were made to be broken”. Two currencies? Sure, and then what? Does that solve the actual issue? Don’t think so.
    As far as I recall from my Economics studies, the different stages undertaken from the days of EFTA lead to a United States structure (for those that want to participate). Ever seen one (that works to a reasonable degree) without a common fiscal policy?


    Posted by Roberto Vargas | July 5, 2015, 9:15 pm
    • Roberto,
      The fiscal policy is oe of the component but I am not sure that this the central problem today. In the US you have a federal tax and local tax with a wide rang of local tax.
      The problem maybe is also the fact that politicians continue to protect their country and not Europe.
      The german are totally responsible of this crisis. Angela Merkel is in fact a week leader not the strong leader she believes to be. Germany is really palying a dangerous game.


      Posted by Champ | July 5, 2015, 10:19 pm
      • Champ, Germany today, France (or French interests) 20 odd years ago. I agree wholeheartedly about your comment about politicians and their national interest, therein mine about a common fiscal policy. It will not mean hands-off, but should make the former more difficult to stay front and centre.
        Was a trader for 20 years in Europe staring during the 80’s and lives with the national ccies. National interest were manipulated through ccy devaluations many a time. The Euro stopped that but, without a common fiscal and monetary policy (and I don’t mean the sales pitch policies we have heard the last few years – even pre 2007), politicians find a back door – that’s what they do. If there is one thing I hope comes out of this debacle is that, the realization that the Eurozone has to take the next step started back in ’58 with the Treaty of Rome.
        It won’t be easy, but these decisions never are.


        Posted by Roberto | July 6, 2015, 3:13 am

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