The EURO is highly in distress from 2010
I have, as a born Mediterranean citizen who grew up in the Germanic-speaking world, often asked: When it comes to a confrontation!
Today, in 2015, we are already so far with Greece. What Imean to say, I try to explain below.
Formerly everything was going smoothly with 10 different currencies. Why can it not be today 2?
The author of this article
I was born in Italy. Growing up - after my age of 6 - in German-speaking Switzerland, close to the border with Germany. Today I have to say simply that the financial mentality of Italy, and of all the Mediterranean countries, is never compatible with the financial mentality of Germany and all northern European countries.
For this reason, the EURO will never be able to work around the European level. Such as the dollar, which has ruined several South American countries, as these have introduced the dollar as the official currency (eg Argentina).
The differences in the mentality
This 2 mentalities differ mainly in the understanding of inflation.
The nordic politicians and its citizens want not have any inflation. These nations are quite economical and the inflation damaged their savings!
The mediterranean politicians and its citizens want a specific inflation on the currency. Not too much of course, but please do not zero because the mediterranean citizens invest their money immediately in immovable and movable property. A slight inflation then paid their fees and the lack of interest.
Introduction of a second currency
EURO & MEDI
For simplicity, I call this value "MEDI" (from Mediterranean countries). Could also be have a different name.
Geographical distribution of the new currency
Of course, the Mediterranean countries, Italy, Greece, Spain, Portugal, etc. including Romania. You could even enclose Corsica and mainland France left the euro. Why not? Then France would even have 2 votes in committee. One would have to cope with it only a psychological hurdle. Not more.
As a Fed, I would leave out the ECB in Frankfurt for about 2 years. That would be more of trust in the financial market. Then I would build a new Central Bank for Medi in the industrialized northern Italy. Why Italy? Italy has proved during the European economic crisis, it has not gone bankrupt. And this despite several scandals on the part of the prime minister. Probably the healthy industry in Northern Italy and the healthy agricultural economy of southern Italy is authoritative.
The stock exchange
The money market would accept a new and important value with open arms and are very happy to "trading".
Beginning of the new currency
The best would be to start a on a 1st January. Exchange rate of 1: 1 between the euro and Medi. After releasing the exchange rate.
The management of the new money
The EU would take the lead of Medi and euros, not "just" the Mediterranean countries for the Medi and the other only for the euro. That would be an all-European affair. It would also be anchored by law that in the MEDI-States the loans, mortgages and wages paid out only in MEDI and likely to be traded. Of course, everyone can privately have a savings account in euros. But many of us sooner had a savings account in dollars or German marks, and savings accounts one can create in all currencies.
The desired inflation of MEDI
One should ensure inflation of at least 2%. Every year Print 2% more bank notes and distribute them to the governments of the Mediterranean states in proportion to their population. A higher inflation would then be possible, but would have to be approved by the two European central banks and Brussels.
The bank notes
As bank notes takes 1 Medi smallest banknote necessarily be present (and not as a coin), but also a 5 and a 20 bill would not be bad. This would improve the existing micro-economy in these countries. One must not forget that the retail (micro business) is very strongly influenced in the Mediterranean.