Kick them out of the Union.
Bail them out and let them stay in the Union.
Shut the whole Union down.
These are the three options generally considered when discussing what needs to be done with those countries in the thick of the Sovereign Debt Crisis in the Eurozone if the crisis worsens.
But what if there was another option? One which preserved monetary union while reducing the jeopardy to the regional economies?
I introduce to you the Euro II! It slices, it dices, it even juliennes (note that julienning was developed by the French). It saves the Euro, the European Union (EU) and maybe the global economy. Yes, split the Euro, creating two monetary unions.
To construct this two tier Euro, five of the seventeen countries in the Eurozone (Greece, Ireland, Italy, Spain, Portugal) would get their own currency while the remaining countries would keep the existing Euro (arguments can certainly be made to change the composition of the Euro split groupings if the PIGS, PIIGS, USPIIGS, Great PIIGS, RUPIIGS debate has been any indication. Apologies to those offended by the acronyms. The shorthand is just too convenient).
Apparently, the idea to split the Euro is not new:
|Selected Articles and Discussions on how to Split
|Date of Appearance||Citation|
While huge effort would be required in creating the requisite doppelganger financial institutions to run this other Euro, the benefits might outweigh the costs of the standard three options.
Certainly the Northern Euro sans its southern exes would experience some appreciation, making Northern Euro denominated export goods more expensive globally. But the cost savings of not bailing out their southern brethren again would be significant.
For the southern Euro countries, would they care? Would they even notice the damage? Borrowing costs would go up. But their new currency would defacto devalue allowing them to maintain tourist and export economies. Would they attack their governmental costs and poor financial controls? Who knows, but I can guess what most informed observers would estimate.
Whatâ€™s in a Name?
“What’s in a name? That which we call a rose
By any other name would smell as sweet.” William Shakespeare
Deep financial analysis of global economics aside, an issue of truly monumental importance needs addressing. What do we call this thing?
Does it get named biologically, geographically, or financially?
In the naming, perhaps we use evolutionary theory, a Darwinian filling of niches if you will.Â Â Darwin had his finches; Europe has its Greater Euro and Lesser Euro? Greater and Lesser need not be judgments, but clues as to the roles each new entity plays. The Lesser Euro could simply refer to the Euro with fewer member countries and smaller economies, and Greater Euro to the one with more countries and larger economies.
However, much work has already been done on the naming, if the Internet is any clue. Add to that some brainstorming and many candidates reveal themselves:
|New Euro||Existing Euro|
|Southern Euro, New New Euro, Neuro, Second Euro, Newro, EuroÂ 2, Euro II, Euro2, EuroTwo, Euro II, NUR or LUR (potential future currency codes),
Latin Euro, Southern Europe Euro, Lesser Euro
|Northern Euro, Old Euro, EUR, Nordic Euro,Â Northern Europe Euro, Greater Euro|
How about a nod to Europeâ€™s historical roots and base the currencies on Europeâ€™s oldest currencies?
|Current Euro’s Ancient Analogue||New Euro’s Ancient Analogue|
|Drachmae (6 spits)||Spit|
|Aureus (gold)||Sestertius (bronze)|
|Denarius (silver)||Dupondius (bronze)|
Consideration should also be given to identifying the process through which currency cleaving occurs. It is neither meiosis nor mitosis, since they create reproductive or equal cells and monetary division creates very different currency units. We are at a loss on the appropriate analogous process.
Finally, as this is being written on April 7, 2011, Portugal is being bailed out and rhetoric is along the lines of â€œcrisis averted againâ€. While it is anyoneâ€™s guess if and when the EU goes into crisis again, it would be some time before a new currency could be in place even if efforts began now. I look forward to at least one new multi-country currency complete with a central bank, banknotes and coins by 2015.
Feel free to comment on the entryÂ or email me thoughts, ideas, or links with additional background.
For more about cell division so that we may understand splitting the Euro, see http://www.pbs.org/wgbh/nova/miracle/divide.html
The Euro has other nicknames and translations in other languages according to http://www.xe.com/currency/eur-euro such as Ege (Finnish), Eumeln (German), Leru (Spanish), Neuro (Italian), Quid (Irish English), and Teuro (German).
I chose not to equate the new Southern Euro with Club Med bar tickets because that would have crossed the line. Â Club Med (short for ClubÂ MÃ©diterranÃ©e or Club Mediterranean) is a French owned vacation resort company which encourages tipping via an on resort scrip. Â While this scrip used to be beads know as popit beads, Club Med beads, bar beads or pop beads, tipping is now done through the use of paper bar tickets. People are without jobs not because they are on vacation like someone at Club Med; they are without jobs because of geographic, historical and demographic legacies and serious structuralÂ problems with their economies.
The Eurozone currency union consists of the following subset of 17 European Union (EU) states: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.
Three EU member states have exceptions to joining the Eurozone currency alliance; Sweden has a de facto opt-out; Denmark has an opt-out which may be abolished in the future; and the United Kingdom has an opt-out provision.
Three European microstates – Monaco, San Marino and the Vatican City – have concluded agreements with the EU permitting them to use the Euro as their official currency and mint coins.
Some countries (i.e., Andorra, Kosovo, and Montenegro) have officially adopted the Euro as their sole currency without a formal agreement with the EU and thus have no issuing rights. Andorra is currently negotiating an agreement with the EU. These states are not considered part of the Eurozone by the ECB.
The EU currently (April 7, 2011) consists of 27 Member States: Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Republic of Ireland, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.
There are currently five official candidate countries, Croatia, Iceland, Macedonia, Montenegro and Turkey. Albania, Bosnia and Herzegovina and Serbia are officially recognized as potential candidates, while Kosovo is also listed as an unofficial potential candidate (due to its perceived uncertain relationship to Serbia).
Four Western European countries that are not EU members have partly committed to the EU’s economy and regulations: Iceland (a candidate country for EU membership); Liechtenstein and Norway, which are a part of the single market through the European Economic Area (!?!?!?!); and Switzerland, which has similar ties through bilateral treaties.