A plan is needed to stabilize Greece’s economy and financial system:
If an agreement with the Eurozone is not reached, the ECB will cease the funding of Greek banks. Greece will be forced to institute capital controls and to limit withdrawals from its banks to prevent a bank run and to remain in the Euro. Productive activity will collapse as individuals and businesses are starved of liquidity. A new government-issued parallel currency will lead to large-scale inflation because the government gains control of the money supply.
Instead, a transitional Euro-denominated money can be created whereby receipts representing bank deposits are used as currency without moving cash outside the banking system and without altering the money supply. Liquidity is immediately restored to the money supply and economic activity can continue, without threat of inflation or risk to the financial sector. Fiscal and monetary systems are kept separated. External balance is maintained. The new currency can be introduced quickly and will automatically reverse into the Euro system once stability returns.
Click here to read the entire plan.
Martin Wolf cited the plan in his Financial Times column, which you can read here, as did Paul Murphy at FT Alphaville, here.
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