Greek crisis? Separate the parts
Regardless of the presence of the Euro, it is quite feasible for debt inside of Greece to be separated from that outside.
Greece could operate internally as a self-regulating state and externally as an EU entity if it had an additional internal medium of exchange, which could then be converted into Euros for payments outside.
Such an approach would retain the EU monetary mechanism across member states but allow Greece to operate an additional system for its internal management. Other individual EU states could adopt a similar process if imbalances such as those in Greece arise, at the discretion of the EU and the state involved. This dual financial system could be achieved by:
- Paying all wages and costs within Greece in drachmas (including electronic payments).
- Greek banks converting payments to external agents in drachmas into Euros or other international denominations.
- Euro cash presented by visitors to Greece accepted at the discretion of the recipient for subsequent conversion into drachmas.
Once internal balances are achieved, stability with the Euro would be the next step, which would allow a more accurate full integration with a greater chance of success.
This process could also be adopted as a first step for other countries planning to adopt the euro. The EU project has been marked by large leaps in order to achieve quick short-term progress but a steadier approach may be more effective and hence faster in the long run.
Darian Hiles is an ERA member living in SA.