In today’s edition of Financial Times Deutschland Polish central bank governor and former Director of IMF’s Europe department Marek Belka calls for Greece to introduce a dual currency system (See here). Belka clearly acknowledges in the monetary aspects of the European crisis including the Greek crisis.
Belka said that EU’s strategy of urging Greece to drastically cut prices and wages in order to become competitive and to accept bailout packages was “hopeless.”. Here is Belka (my translation):
“The country seems to need a special arrangement, perhaps for a limited time,” said the central bank governor … “I am not advocating or urging Greece to leave the euro. However, for internal purposes, for example, one could think of a payment instrument that would be used within the country, especially the state sector.”
It is the first time a top European official openly acknowledges the monetary nature of the crisis. Marek Belka is not a nobody. He is former Polish Finance Minister and former Prime Minister and importantly from a European perspective he has served as Director for the IMF in Europe. In 2003 he was effectively Iraqi Finance Minister in the interim coalition administration (the Bremer administration) of Iraq.
Needless to say Marek Belka has spend time at the University of Chicago and is well-schooled in monetary theory and history. Last year I had the oppurtunity to talk to him about monetary history. His standard reference to the Great Depression is Friedman’s and Schwartz’s Monetary History.
Update: As a blogger I can see what countries my visitors come from. Normally most readers are from the US followed by Denmark and Sweden. Over the last 24 hours I have had quite a lot of visitors form Belgium…I wonder why anybody in Bruxelles would be so interested in this topic?;-)