Post originally appeared on Keep Talking Greece.
Forget the Grexit, the Grexident and the Drachma scenarios. They are out! The 20-April-bankruptcy script writers have invented a new solution: something like a parallel currency. No, not the older scenario option of using Drachma nationally and the Euro internationally. Something new: the IOUS! A form of alternative mean of payment so that the Greek state will be able to pay salaries, pensions and suppliers.
What are IOUS?
An IOU (abbreviated from the phrase “I owe you”). It is usually an informal document acknowledging debt. IOUs usually specify the debtor, the amount owed, and sometimes the creditor. IOUs may be signed or carry distinguishing marks or designs to ensure authenticity. In some cases, IOUs may be redeemable for a specific product or service rather than a quantity of currency constituting a form of scrip.
According to Reuters, several euro zone officials unfolded this option on Friday, assuming that there would be no agreement between Greece and its creditors and that the country will run out of cash on April 20th. Here we should reckon, that during the Eurogroup meetings in February, the claims were that “Greece would run out of cash by end of March.”
Anyway, one senior euro zone official told Reuters:
“At some point, when the government has no more euros to pay salaries or bills, it might start issuing IOUs — a paper saying that its holder would receive an x number of euros at a point in time in the future.”
“Such IOUs would then quickly start trading in secondary circulation at a deep discount to the real euros and they would become a ‘currency’, whatever its name would be, that would exist in parallel to the euro.”
The IOUs might not be widely accepted in shops and could be used as a way to settle only some government-related payments such as energy bills, at least initially, the IOUS scenario claims adding that .
At the same time the government would keep euros from tax revenues to cover debt repayments to avoid default.
“The arrangement could be temporary to keep the government going as it hopes to negotiate a deal with creditors that would unlock more euros in loans,” a second euro zone official said. (full story Reuters)
The anonymous euro zone officials refrained from elaborating about how exactly the IOUS-scenario would go into effect in real and practical life. If, for example, civil servants will receive their full wages in IOUS, if a pensioner will go home with a package of IOUS-papers ‘worth’ 600 euro, wrapped nicely in blue and white bands and bows.
A similar model of so-called Registered Warrants was implemented in 2009 by the state of California when it went bankrupt.
I have no idea how state employees in California managed to survive and cover their monthly needs with papers that would be redeemed in cash sometime in the future.
It looks as if the IOUS-option is not even informally discussed among the euro zone officials. Most likely, they just create scenarios to increase the pressure on Greece.
Of course, the euro zone officials did not forget to mention to Reuters the possibility of capital controls, as well.
Some German finances websites went even so far to upload articles for the sake of articles and scaremongering with the creative titles: Facts check – Capital controls in Greece already as of this weekend?
After two paragraphs and 300 words, the author comes down to the real world away from social media, realizing “that there is nothing about it, excepts some tweets claiming this.”
PS double *sigh*
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of The Duran.