As a point of departure I refer to this paper, on page 2 in the Real-World Economics Review, issue 71, 28 May 2015. The paper argues for and describes how to possibly implement an electronic parallel currency in Greece.
But the proposal for a parallel currency should now be even more specific, tailored to the current drama and urgency. And the pressure to do something along the lines suggested below is increasing all the time (because the so-called “bailouts” only imply further exponential debt growth in a pyramid game – something that is mostly not recognised in the media and by commentators).
Here are my suggestions:
1. Forget the need to first organise government hardware for the system. Decide instead to do it initially via the cloud; fast – can be supplied on short notice (by this firm, for instance – DISCLAIMER: I have no commercial engagement there whatsoever). But prepare transit to government servers while the cloud-based system is up and running and gains confidence and popularity. Start with mobile to mobile only, but build a terminals network while the system picks up. Involve the Greek Postal System as the backbone of the network, under the Treasury (not the Central Bank, which continues with euros).
2. Declare that all recipients (employees and pensioners) of wages from the government will receive from a certain date onwards – say – 10% in “Tax Notes” (“TN’s”, but name can of course be something else). This is 10% on top ofcurrent wages in euros, and one TN is nominally considered on a par with one euro. The TNs can be used to pay tax, see below) and do not have to be declared legal tender. Explain to the public (comprehensive and persistent information to the public is very important) that if recipients wish to start spending them, they must first – following an acceptably safe KYC (“Know Your Customer”) procedure – go to the nearest post office and identify themselves with passport or similar so that the P.O. can send a confirmation to the system that the mobile phone number actually represents the person in question.
This gradually builds up a database of id’s connected with persons’ mobile numbers. People who procrastinate still receive the regular TN payment into their TN account, but they can’t access it until they register as explained above.
3. Businesses which wish to participate must do the same ting. They do not of course receive any monthly TN payments, but they can sell things for TNs to the government, and people will with time start to offer them TNs in payment for purchases along with euro.
4. Explain that any person or firm can pay 10% of their taxes with TNs, one TN counting as one euro.
Before proceeding to PHASE B (below), note that 10% out and in is a fairly low figure. The idea is to not rock the boat too much in the initial phase. This is also the reason that the TNs are paid out in addition to current euro wages/pensions. Few recipients will protest against this (but this is changed in PHASE C, see below.)
This is when the system has gained a fair amount of confidence and TNs are widely used along with euros. Firms mostly accept a mix of euros/TNs in payment even if some choose a TN share smaller than 10%, and many private sector workers and self-employed also do that for their wages. There is an incentive both for businesses and workers to accept a reasonable TN share, since that results in more sales or probabililty of getting a job. Terminals are gradually available in most businesses, and the Post Office employees are by now schooled and able to help people with advice and other TN-related services. Post Offices can also do non-mobile transactions using old-fashioned giros for the few that do not have or wish to use a mobile phone. There is now a well defined market for exchange TNs/euros, and the TN exchange rate is not too far below par since people have started using a 10% TN share to pay taxes. The initial very low and volatile exchange rate has stabilised at a higher level.
The government wishes to directly or indirectly employ a large share of unemployed. This will be possible if all current employees/pensioners instead of 100% euros plus 10% TNs, now accept – say – 70% euros and 40% TNs. This means that there will be euros freed up for government payouts to former unemployed, using the same euro/TN mix for them. The tax payment mix is also changed accordingly, to 7/11 parts euros and 4/11 parts TNs. This increase in the allowed TN share of tax payments ensures that the euro/TN exchange rate does not fall (much).
PHASE D, E …
Possible Grexit and 100% TNs, but this is not necessary, one can take the time needed with the parallel system – with little turbulence and a smooth process, only with some adjustments now and then to the official payments and taxation TN/euro mix, based on how things develop. One can even go gradually back to 100% euros, if that is the wish.
And during all these phases, the Greek government will have a much stronger position concerning negotiations about euro public debt relief.