As was said three years ago, this seems like the safest option in a worst-case scenario. If this backdoor method gains traction in Greece, it would no doubt help avoid a Russian and Chinese invasion via Athens and full economic breakup of the single currency bloc. Other embattled countries might string along.
European Central Bank board member floats the idea of an “IOU” system to pay civil servants if country runs out of euros
Greece could start using a “parallel currency” to pay its civil servants if it runs out of cash, one of the European Central Bank’s board members has suggested. His comments come as the country scrambles to reach a deal with international creditors and avoid a default.
Highlighting the desperate situation faced by the country, Yves Merch, a member of the ECB’s executive board and governor of Luxembourg’s central bank, told Spanish newspaper La Vanguardia that Greece could resort to using “exceptional tools” to pay its obligations.
“There are intermediate solutions circulating, such as the issuance of a parallel currency or IOUs,” he told the newspaper. “All these measures are among the exceptional tools that any government can consider if it has no other options. But all of them have a high cost.”
The ECB has already analysed how such a scenario could play out. Officials told Reuters in April that creating a virtual second currency within the eurozone might not be enough to keep Greece in the 19-nation bloc.
Analysis showed around 30pc of Greeks would end up receiving such “IOUs” rather than cash, which would put further pressure on Greek banks as workers dipped into their their savings.
Billions of euros have been pulled out of Greek banks since the end of last year, which has left banks reliant on a drip-feed of liquidity from the ECB. The central bank raised its emergency liquidity assistance (ELA) to Greece’s banks by €2bn to €79bn on Wednesday, in a sign of further progress between Greece and its creditors.
Full article: Greece could use ‘parallel currency’ as desperation grows (The Telegraph)