I have thought about this possibility in the Irish case. The problem is that domestic creditors could still demand payment in Euros if the Euro remained an alternative legal currency. As the New Punt depreciated, domestic Euro denominated debts would become more expensive to pay, transferring income from debtors to creditors. Euros would also leave the country in anticipation of future forcible conversion, limiting the supply and forcing up their value, necessitating capital controls. If you have to print a new currency and introduce capital controls you may as well switch currencies. This would not be as difficult as often feared. Ireland has a Euro printing press and could issue the new currency in the denominations and sizes of the Euro with some small changes to differentiate the new bills from Euros. A one to one exchange rate can allow easy transformation of bank accounts and credit card transactions. This means the middle classes can function without cash in the transition period. The earliest printed currency can be issued as social security payments with banks in middle class areas waiting for later tranches. A substantial amount of the government's euro debt would have to be defaulted. Terry
Message: 35 Date: Mon, 18 Jul 2011 12:40:26 -0500 From: Robert Naiman <[email protected]> Subject: Re: [Pen-l] what about a dual-currency system for Greece? To: Progressive Economics <[email protected]> Message-ID: <calmnhnr5gxsjoyg-c9h5vdum33ubrnunprxemkhnekbpenh...@mail.gmail.com> Content-Type: text/plain; charset=ISO-8859-1 I certainly agree that Greece should (at least partially) default on its Euro-denominated external debt; my proposal does not address that issue. My question remains: should not Greece consider issuing its own domestic currency as a means of reflating its domestic economy? Isn't it the case that it is not necessary to ban Euros from Greece in order to do so?
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