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Deutsche Bank proposes Geuro for Greece, if the country opposes the bailout

22 May 2012 / 00:05:56  GRReporter
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A new idea for Greece was presented by Deutsche Bank in an analysis of the possible options for the emergence from the growing crisis and it is for the country to obtain its own currency – the Geuro, without breaking up from the euro area. The bank suggests that it should be a domestic currency used in parallel with the traditional euro. Deutsche Bank financial analysts reported that the next Greek government is very likely to be composed of parties opposing the bailout agreement. They will not be willing to meet the obligations undertaken by Lucas Papademos’ interim coalition government involving PASOK and New Democracy. Unilateral cancellation of the bailout agreement most probably will lead to a full suspension of payments. At the same time, the option of renegotiating the bailout agreement seems paltry, even impossible to bankers.
 
It is impossible for the International Monetary Fund and the other eurozone countries to depart from their demands to Greece, which means no bailout in fact. Deutsche Bank believes that such a precedent of relieving the obligations of a country that is under financial supervision will ruin the efforts to control the crisis. They fear that other European countries with financial difficulties might require not so stringent terms for fiscal consolidation, which in turn will increase the pressure on Germany and will push it to exit the single currency. However, the bank report reads that it is impossible for Greece to leave the eurozone. The remaining countries of the union would not abandon it in difficult times either.

The easiest way would be to stop the bailout to the Greek government, but to continue the payments of the foreign debt and the recapitalization of Greek banks. In this case, a parallel currency will be introduced bound to the euro, but the country will have the opportunity to devalue the domestic rate. Initially, the devaluation will be significant but then, the government will be able to stabilize the economy and restore the rate of the local currency (Geuro) to the level of the euro through fiscal consolidation and structural reforms. In this way, Greece will not be completely isolated from the single European currency and will have an open door to return to the euro in the future.

 

Tags: EconomyMarketsDeutsche BankGeuroGreeceElections
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