A study focusing on the introduction of a new domestic currency for Greece, called the “Geuro,” which will be used parallel to the current currency, was published by the Levy Economics Institute of the Bard College.
According to the study, which was introduced during a conference organized in Athens, Greece should adopt an “employment of last resort” (ELR) program, where the state would act as the employer of last resort. This program would be funded temporarily through a parallel financial system within the eurozone and would aim to stop the Greek job market from collapsing.
According to the study “Strategic Analysis – Prospects and Policies for the Greek economy,” this parallel financial system would rely on newly issued state bonds in Geuro. All payments from and to the state would be processed through the new bonds.
The bonds could be modeled on existing pharma bonds, which were issued some years ago to meet the obligations of the state to the pharmaceutical sector. Pharma bonds held all the qualities of conventional bonds and could be traded in the market equally.
For many economists, creating actual liquidity through such bonds could be achieved, only if banks would guarantee them.
The new financial system would proceed with the issuance of new zero-coupon bonds, absolutely adaptable in regards to the repayment period, hence putting no pressure on the state debt.
Geuro bonds would be able to be transferred electronically into the bank accounts of individuals or companies through a specialized security system. Certificates could then be issued for small or large market transactions, thus creating a nominal exchange rate between Geuro bonds and the euro.
Meanwhile, one could expect the government to ask for a portion of future tax payments to be made in Geuro bonds, so as to strengthen and consolidate demand and confidence in the parallel currency, mentions the study.
The Geuro could be exchanged only in one direction, from euro into Geuro, so as to avoid any commercial attacks aiming to reduce the currency’s use in the domestic market, but also to reduce the possibilities of transferring money out of the country.
The study underlines that bank deposits would of course remain in euro, while any transactions made in euro would also remain in that currency. The adoption of a parallel currency would not mean exiting the eurozone and its adoption would require only minor alterations to the EU Treaty.
A powerful argument in favor of this policy is the flexibility of the Greek commerce. As this flexibility is pretty low, as also argued by the Institute, it seems that such a program would be the best option and would help in raising the living standards of the Greek society.
If this scenario was to be adopted, the Greek GDP would grow by 7 percent in 2014, barely affecting the current account balance of the country, while also creating 550,000 job opportunities within a single year.
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