The German financial newspaper Handelsblatt has published an article examining the “Geuro scenario”, where a parallel currency is introduced in Greece, should the Greek government be unable to come to an agreement with its international creditors.
According to Deutsche Bank’s former chief economist Thomas Mayer, the introduction of a parallel currency could be helpful and necessary for Greece, as it would allow the payment of wages and pensions. The new currency could lose up to 50% of its value, but this would also drive down the cost of production, thus helping businesses become more competitive.
In turn, this will create the necessary conditions for economic growth and a restoration of trust, which could help the parallel currency regain its value and approximate that of the euro. Nevertheless, Mr. Mayer warns that there are huge risks, as this parallel currency may not recover and further plunge, dragging along with it any hope of ending the crisis.
Mr. Mayer first proposed his “Geuro” plans in 2012, when SYRIZA was close to winning the elections and brought it back after the January 2015 elections. The former Deutsche Bank economist claims that he presented his plan to Finance Minister Yanis Varoufakis and PM Alexis Tsipras on the 28th of April.
The newspaper comments that many economists are doubtful as to whether a parallel currency could help stabilize the Greek banks, with the Bundesbank being particularly reserved.
