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Thread: Dual currency economies - would it work in the EU?

  1. #1

    Dual currency economies - would it work in the EU?

    Many African, South American and other states have worked on a dual currency basis for decades; i.e. happy to do many transactions in a 'hard' currency like the USD.

    Why couldn't the EU?

    In fact, if you look up the euro in wiki there are more states that use the euro as their only currency than there are members of the eurozone!

    Could a dual currency economy work in the EU?

    I'd like to see a situation where the euro was used side by side with a country's own currency.

    There would be one condition; a totally free exchange system; i.e. no commission charge and no spread between buying and selling the home currency and the euro and the exchange rate to be fixed in the short-term but reviewed every month to reflect the strength of the individual country's economy and 'fiscal discipline'.

    The individual country could either borrow euro from the ECB provided it met the rules or have to borrow in its own currency at higher market rates if it failed.

    The public sector could be paid in the home currency and the private sector could pay its employees in either the local currency or the euro; the desire for a stable currency would hopefully provide the internal discipline to maybe make the home currency defunkt over a period of time (maybe a decade or so) and if the country failed then the ECB would stop the issue of bonds in euo and the country could go back to having a weak economy based on tourism and increasing exports by making its own currency worth less and less.

    Just an idea...........probably flawed like 99.9% of my ideas.

  2. #2
    I'd love to go to say Italy and have the choice to pay either 2 euro for a coffee or 10,000 NITS (New Italian Lires); wouldn't you?


  3. #3
    Don't know where you buy your coffee. My local bar charges 95c and the posher cafes in town only charge €1.20. As for NITS I'd imagine it would start at parity and quickly devalue to say L1.50 to the . That would reduce the overall cost of my coffee as I would have exchanged from sterling. Sounds good to me.

  4. #4
    My local bar just hiked the cost of a normal coffee from 50 cents to 60 cents, but I was thinking of what it might cost in Rome or some Greek island where they think tourists are there to be milked dry (or airport prices).

    I have lots of investments in EUR, but enough of an income stream in sterling to also benefit when the EUR depreciates; I just got tired of the GBP or USD always going down in value just when I had a reasonable wedge to exchange.

    Ay one time I thought splitting investments three ways was the best (between GBP, USD and EUR) and always reinvesting in the weakest currency but I'm happy with a simpler life these days.

    I'm in Gozo (Malta) and they got a fantastic exchange rate on entering the eurozone (something like one Maltese pound to 2.33 EUR) and my hope is that if the euro dies they'll get a good exchange rate if they reintroduced the LM.

  5. #5
    Ah, fond memories of Gozo, so unpopulated, 30 years ago, but limited services..

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