Give Greece a chance – with a parallel currency that stays

In 2011, Christian Gelleri and Thomas Mayer proposed a second currency for Greece. Since then the Greek problems have not been solved and have instead become worse. The country is still enduring severe economic problems and national bankruptcy remains dangerously close. A parallel currency »NEURO« could help to avoid the worst and act as a leverage for the better.

he crisis in Greece is now ente - examples show that a decrease in income le - in contrast to the US, which has responded ring its eighth year. Per capita vels of 30 percent has caused a number of very expansively since 2008. While the US Fe - Gross Domestic Product (GDP) human tragedies. At the end of 2014 the deral Reserve printed dollars to buy large in 2008, the first year of reces - T sion, was about 23,200 . Taking into account taxes and duties, a Greek earned an average of 1,000 euros per month. In the wake of the economic crisis, GDP fell to just 16,500 in 2014 and dis - posable income to about 700 euros per month. If the price of goods had fallen at the same rate, that would not be worth mentio - ning. However, a look at the cost of living in - dex in Greece for the same period shows an increase in prices. By comparison, the aver - age German income for 2008 was about 1,500 euros and is currently at about 1,600 euros per month.

Economic Crisis Past And Present What would happen in if the aver - age income dropped (at constant prices) to 1000 euros? We have to look back a long way before we find something comparable in Germany: the economic crisis of 1929 to 1933. During this period, per capita GDP al - so fell by a third. Most Germans lost patien - ce after four years and chose Nazism, which both economically and morally completely

»The limitation of Greeks brought the left-wing Syriza party to quantities of US government bonds, the Eu - cash outflows should power and set high hopes on the new go - ropean Central Bank only reacted slowly to have the highest priority vernment. Premier minister Tsipras appoin - economic weakness and falling prices. The ted economist Yanis Varoufakis as finance mi - south of Europe was particularly affected. Va - for Greece.« nister of the new government. This is re - roufakis draws an interesting comparison to markable for in February 2014 Varoufakis the crypto-currency Bitcoin. The amount of posted a proposal for a parallel currency for Bitcoins is absolutely limited to 21 million. Greece at his blog (http://yanisvaroufakis.eu). There is no possibility of achieving growth wrecked the state within twelve years. In What was this proposal? momentum by increasing the money supply. Gree ce, however, people have now trusted Similarly, the money supply is fixed in the sou - the established political parties for eight years Proposal By Varoufakis thern countries of Europe. The strength of the but the rapid drop in income has left a deep For Varoufakis the starting point is the down - northern economic regions draws money out mark on the people of Greece. Parents who ward trend of the Greek economy and defla - of the southern regions, which is lacking the - cannot feed their children and have to send tionary tendencies in the Euro area since re more and more. Varoufakis did not consi - them to SOS Children's Villages, sick people 2013. In his view, the monetary expansion der in his analysis that the European Central who are not treated anymore and many other of the European Central Bank was too small Bank has also greatly increased the quantity

16 September 2015 · REGIOS of money, similar to the US Federal Reserve. Varoufakis’s suggested parallel currency thus 5,600 Euros per capita. Even more of this in - None of this increase has arrived in Italy, Spain has strong disadvantages: crease remained in Germany, namely 6,700 and Portugal yet. On the contrary, money 1. In an atmosphere of impaired trust the Euros per capita. In Greece there was nothing has even flowed away from there. The most newly created parallel currency would be left of this increase. On the contrary a se - massive drain, however, happened in Gree - changed back in no time. rious outflow of funds at the rate of 2,900 ce. Thus an even greater influx of Euros would 2. The bonus indeed benefits honest taxpay - Euros per capita was measured. The »free not have reached the Greeks either. Despite ers but if the overall willingness to pay ta - movement « of the Euro had a positive effect his incomplete analysis, Varoufakis came to xes does not significantly increase then a for Germany. For Greece, however, the Euro a correct conclusion, namely that the intro - poor state will get even poorer through is a disaster. From the German perspective, duction of a parallel currency could help to the FT-Coin. This increases the probability the current situation in the Euro area can ea - stabilize cash flows. of bankruptcy and the preference to chan - sily be handled. The German economy con - ge the FT-Coin into Euro immediately. tinues to benefit from the cash inflows and Inspired by the debate about the crypto-cur - 3. The FT-Coin tends to slow velocity of cir - the received loan guarantees for the southern rency Bitcoin, Varoufakis developed the con - culation because it is more likely to be hoar- European countries currently do not (yet) lead cept of »FT-Coins «. FT stands for Future ded due to the tax credit. to payment obligations for the German go - Taxes. Money is created in expectation of fu - vernment. ture tax revenues. Varoufakis was aware Through this proposal we can well see that that paying taxes is not particularly popular a parallel currency is not automatically an im - Parallel Currency For Greece in Greece, so he tried a stimulus: »You pay, provement. It depends very much on the spe - The limitation of cash outflows should have say, 1,000 Euros for 1 FT-Coin issued by the cific design. A bad design can not only fail to the highest priority for Greece. A possible par - Spanish, Greek, Italian or Irish Treasury etc. achieve its intended effects but even cause allel currency must therefore be designed to This process is connected with the following the whole thing to backfire. In technical terms prevent leakage. In the first proposal for a agreement: The FT-Coin can be redeemed it is called a negative money multiplier when NEURO (see Gelleri / Mayer, 2011 »Express at any time in 1,000 euros or, after two years, the new money set into circulation causes a money for Greece « and Gelleri 2012 »NEU - it induces a tax credit of 1,500 Euro. Each reduction in economic performance. In this RO for Greece « under www.save-the-eu - FT-Coin carries a time stamp, which ensures case, Goethe's »force which always wants evil ro.org) an exchange fee of 10 per cent for that the additional taxation value will take and yet creates the good«, would be exact - the exchange of a parallel currency into Eu - effect no earlier than two years later. After re - demption of the FT-Coins new FT-Coins can be issued. This ensures that the total amount Eurozone Germany Greece of FT-Coins is no higher than, say, 10% of Greek GDP. » M1 end of 2009 per capita 12.100,00 € 14.800,00 € 11.300,00 € M1 end of 2014 per capita 17.700,00 € 21.500,00 € 8.400,00 € The concept reveals much about Varoufa - Difference + 5.600 € + 6.700 € - 2.900,00 € kis’s thinking. The guarantee to redeem FT- Coins without deduction in Euros at all times Table 1 depends on a high level of trust. If this trust were tested in practice and many participants ly reversed. But can we not perhaps also want ros was advocated. This proposal is useful exchanged the FT-Coins for Euros, one would the good and then create the good? for crisis-hit countries such as Italy, Spain and probably discover that not so much liquidity Portugal, who can still hold plenty of Euro re - is available. The second assumption is that Panicked Greeks Drain Cash serves. This was also the case in Greece in the 50% bonus increases the willingness to Back to the diagnosis of the patient: It is ob - the years 2011 and 2012. Meanwhile, the eco - pay taxes. The danger is that those who still vious that the Greek patient is terminally ill. nomic and political situation has become so Economic output has fallen by one-third. Fac - acute that the original proposal has had to tories are shut, workers sit at home and be modified until the situation stabilizes. It young people have the choice between un - should also be noted that the impression is »With such a parallel employment in their own country or uproo - that the child has already fallen into the fo - ting by emigration. Does the problem may - untain. But let’s imagine that the Greek cen - currency, the money be lie in wages or the economic structure? In tral bank, the Greek government, the Euro - supply is increased 2013, Greece was the no. 1 in terms of re - pean Central Bank and the Euro partners ag - forms and reduction of labour costs (study by ree on the following schedule: per capita up to the Lisbon Council). Nevertheless, the eco - 1. The Greek central bank is given permissi - 2,000 NEURO.« nomy did not recover. In the media it was said on to emit a parallel currency to the amo - that the reforms must continue and that the unt of twelve percent of Greek GDP. This cuts were not deep enough. But if unit la - corresponds to a value of about 22 billion bour costs compared to the Euro area have Euros. fallen by 15% over two years (2011 to 2013), 2. The parallel currency is named NEURO, the pay taxes take the reduction of one-third then the problems in Greece do not have new Euro for Greece. and that those, who pay no tax today will much to do with the allegedly high labour 3. The parallel currency is published purely el - not do so in future either. This would there - costs, but with a profound crisis of confiden - ectronically and is not convertible into Eu - fore potentially reduce the state budget fur - ce. This can be seen very well from the cur - ro. There is no cash. ther. The third issue is the appeal of hoar - rency measures: 4. The Greek State guarantees the acceptance ding money for those who have to pay taxes of NEURO for the payment of taxes, duties in the near future. Between 2009 and 2014, the money supply and benefits 1 to 1 against the Euro. The per capita was increased in the Euro area to official value of 1 NEURO is 1 Euro.

REGIOS · September 2015 17 Back to Drachma or forward to Neuro? Money can be improved and become a solution. The Greeks could be pioneers of a new economy.

tion incentive rate flows to the commerci - Positive Effects al banks for the operation of the accoun - The NEURO strengthens the community in ting system. There are 200 million NEUROs Greece. With such a parallel currency, the mo - »The expected available to cover costs of an estimate of ney supply is increased per capita up to 2,000 four million accounts, each with a cash - NEURO. The expected high velocity of NEU - high velocity of NEURO less payment card. The commercial banks RO could stop the economic decline in the could stop the are not allowed to charge any additional short term. The NEURO would primarily fees for account management and the is - strengthen the revival of the domestic eco - economic decline suing of debit cards. One third of the in - nomy. Farmers, crafts, transport operators, in the short term.« come from the circulation incentive rate retailers and domestic service providers and flows to the Greek central bank for the development of infrastructure for the par - allel currency. If a drop in the velocity of 5. Trading of NEURO is allowed. The exchan - NEURO money occurs, the central bank can »If eleven million people in ge rate develops according to supply and increase the circulation incentive rate. Greece were to accept the demand. For each trade transaction a tax 8. By law, all (domestic) creditors of the Gre - of 3% is payable. ek state will be obliged to accept NEURO NEURO, they would take 6. The NEURO is provided to the Greek go - at a fixed ratio. The initial rate for the first their fate into their own vernment interest-free for three years. Af - six months is 10%. As soon as the money ter two years, the results are evaluated. circulation has accelerated in Greece, the hands again.« The rules are optimized and a new opti - rate is gradually increased. Members of Par - mal money supply is determined for a fol - liament and government officials get paid lowing period. from the start 75% of their net salary in 7. In parallel to the existing Euro accounts, NEURO. producers would benefit most. Through el - commercial banks keep NEURO accounts 9. Much of the NEURO is used for invest - ectronic payments all transactions are accu - with a circulation incentive (storage fee) ment and social programs. An example rately recorded. To avoid the circulation in - of initially 3% per year. This “storage fee” would be the reactivation of night allo - centive fee, NEURO would preferably be used stimulates the circulation of the currency wances for police officers. Another exam - for tax payments. The NEURO would not be because the earlier the money leaves the ple would be interest-free loans for small suitable for hoarding, but only for paying, in - liquidity account for payment or lending, and medium businesses. Even social pro - vesting and giving. It would create an »ea - the less costs arise. Transactions to Euro grams to alleviate the worst misery could sy« money, which would be spent willingly accounts should at first be made techni - be subsidised in NEURO. and quickly. Once the tax bill arrives, NEURO cally impossible. One third of the circula - are immediately transferred. The Euro would

18 September 2015 · REGIOS remain strong in tourist regions and in ex - port-oriented companies. But in the area of Model calculation EURO NEURO domestic economy the NEURO could become a popular means of payment because it would Government expenditure per month 8 Mrd. € 2 Mrd. NEURO be available for the majority of the popula- Average money supply 90 Mrd. € 22 Mrd. NEURO tion and not scarce like the Euro. Money supply multiplier 2 x 4 x The Problem With Paper Money GDP currently 180 Mrd. € A major issue are the Euro banknotes and GDP after the introduction of the NEURO 160 Mrd. € 88 Mrd. NEURO coins, which have become very popular in Greece since the Euro was introduced. In 2007 Tax revenues + 22 Mrd. NEURO about 1,000 Euros per person were in circu - Cost of negative interest 0,6 Mrd. NEURO lation, in 2014 it was more than 2,000 Eu - ros. However, average Greeks do not have Table 2 2,000 Euros in their wallets, but less than 100 Euros. So where is all the cash? A small pro - sely monitored. As the largest economic play - Germany could contribute to a positive mood portion circulates in the black economy, a er, the Greek State can significantly contri - by restructuring the claims against Greece large proportion is hoarded in vaults. This is bute to the promotion of cashless payments. as follows: Germany waives interest and of - reflected in the high number of 500-Euro no - All expenditures in NEURO and Euro could fers postponement of debt repayments until tes, which are rarely used by the normal be made without cash. On the revenue side, 2020. From 2021, Greece would be obliged population for day to day payments. The the state may charge a transaction tax for to pay 5% redemption per annum, pay able Greek government has proposed to limit pay - cash payments. Thus, paying taxes with Eu - in NEURO. This conscious step would prevent ments in Euro banknotes and coins to a ma - ro cash would become more expensive than a disorganized bankruptcy and would ensu - ximum of 70 Euros per transaction. Payments with NEURO and NEURO salaries would be a re that the Germans receive repayment for beyond that would be punishable by law when bit higher than the Euro salaries, which would their years and decades long export services to approximately the same degree from Gree - ce. For this purpose, however, it is first of all Thinking differently is exhausting. But it is worthwhile to reflect on the necessary to consolidate the structures in development of our money. Greece and rebuild the domestic economy. This type of restoration from the inside with the outside only assisting could serve as a model for other countries in crisis.

In conclusion, a small model calculation shows which value added effects a parallel currency might have. The effects would be built up gradually. After two to three years, GDP could again reach the level of 2008.

A parallel currency would cost the individual citizen an average of about 50 Euro per year, but on the other hand, a value of 6,000 Eu - ro-equivalent is generated. This is such an impressive ratio between expenditure and re - venue, that the question arises why such a measure has not already been implemented a long time ago. z

www.save-the-euro.org using cash. Whether such a ban can be im - mean further incentives for the use of the par - Translation from German into English by Jens plemented and monitored, however, is very allel currency. Another aspect is effective ta - Martignoni, Daniel Wittig and John Rogers doubtful. xation. Which taxes are bypassed and which are effective for all? Maintaining social The Harvard professor Kenneth Rogoff calls balance is the task of a more just political Christian Gelleri, born 1973, is a trained gradua - for the abolition of cash, because thereby system. te teacher of trade and the black money economy and crime could Master of Business Ad mi - be reduced and secondly, the introduction of Create A Positive Atmosphere nistration. He is the initia - circulation incentive rates would be facilita - Most important, however, is the creation of a tor of the Chiemgauer, the ted. In 2009, he was still ridiculed for this pro - positive mood and awareness in the popula - most successful regiogeld posal. Meanwhile, he receives prizes and tion that only by rapidly spending the means () in Ger ma - ny. As a founding board awards, most recently in December 2014 as of exchange will there again be revenue for member of the Regiogeld a »Distinguished Fellow « in . Greece entrepreneurs, citizens and the state at the Association Germany he has significantly sha - alone can not solve the Euro banknotes and end of the day. If eleven million people in ped the dissemination of local currencies in coins issue. Therefore, the development of Gree ce were to accept the NEURO, they would Germany and has a broad knowledge of the the Euro banknotes and coins must be clo - take their fate into their own hands again. status and prospects of new currencies.

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