Advisory firm pleads for euro and guilder at the same time

13 December 2012

The European Union should allow for a dual currency system. According to the consulting firm Strategic Decisions Group, struggling countries should be given the flexibility to introduce national currencies alongside the Euro. The local currency can then be used for so-called "hot-potato's", country-specific matters that either are completely unaligned with EU policy or matters that fall outside European monetary and fiscal integration.
"The national currency would be used for payment of public pensions, the salaries of public sector employees and also for domestic transactions" says Mazen Skaf, Managing Director of the Europe and Middle East arm of Strategic Decisions Group. The consultant continues: "The specific local currency can be used to restore competition and to restore economic growth in that local market".

An important pre-requisite for the success of the system is backing from the European Central Bank (ECB). "The ECB (European Central Bank) would needs to support the countries with the transition by ensuring people have faith in the local currency and by ensuring that trading remains within an acceptable bandwidth".
The advisory firm’s idea is not completely new. Earlier this year, the city of Volos in Greece introduced its own currency system (based on barter) and Macedonia currently is investigating the possibility of implementing a similar system.
In many European countries analysts have cast their doubts on the feasibility of a dual currency system. According to Moorad Choudhry, head of business treasury at RBS, it is an "elegant solution" but he has serious concerns that valuation problems would mean no-one would want to hold the alternative currency. "I can see it struggling to get off the ground," he said. "The reason that many countries use the dollar alongside their own currency is that it holds value as it is renowned as the world's reserve. Any alternative exchange system would probably not have that guarantee.


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