ifo president advocates parallel currency for Greece
Hans-Werner Sinn (pictured), president of the German think tank ifo Institute has argued in favour of a Greek exit from the eurozone, stating that the country would benefit from a temporary parallel currency.
According to Sinn, the total volume of Greek public debts to international states and institutions currently amounts to €325bn, with one third being committed to financing the current account deficit, one third to repayments of debts and one third to compating the impact of capital flight.
“Greece would benefit from exiting the euro, which would enable it to devalue its currency and allow Greek consumers to buy domestic, rather than imported products” said Sinn.
The ifo president recommends to introduce a temporary two currency system, with a new national currency being complemented by the Euro. “Based borrowers notes issued by the Greek state, the country could solve its liquidity problems, however, this measure would not resolve the lack of competititveness of the Greek economy or prevent a wave of bancrupties.”
Consequently, Sinn suggests that Greece could only restore competitiveness by exiting the eurozone and establishing an independent, devalued currency.