That Greece is well beyond the edge of bankruptcy and that it will eventually have to abandon the euro has become perfectly obvious. Admitting that though, and acting in consequence, is impossible. That’s the heart of the political problem. But a fantastic solution does exist: the Argentinian patacón (Leggi in Italiano)
A ‘patacón’ will save the Greek economy — It’s easy to get distracted by things that really matter and to forget that for the poor man’s Bismarcks and recycled politicians who manage the European Union in Brussels, the collapse of the Greek economy is above all immensely embarrassing.
That the country is well beyond the edge of bankruptcy and that it will eventually have to abandon the euro one way or the other has become perfectly obvious. Admitting that though, and acting in consequence, is impossible. That’s the heart of the problem, at least of the political problem. Fortunately, a solution—concrete if fantastic—does exist: the patacón.
Nothing that has happened in Greece is really new. In many respects the situation—too much debt in a strong currency, empty State coffers, a truly terrible government —is all eerily similar to the collapse of the Argentine economy in the late 1990s. In that case, the strong currency was the American dollar, but it all amounts to the same thing.
Argentina’s immediate problem was that it did not have the pesos to pay employees, above all in the public administration and state-owned companies. By law the national currency was required to be worth a dollar—and those had all been spent. In Greece a euro must be worth one euro, essentially the same concept.
It was the Province of Buenos Aires that first plucked the patacón from its magician’s top hat, naming it after an antique Argentinian coin. Formally it was instead a “Letra de Tesorería para Cancelación de Obligaciones de la Provincia de Buenos Aires.” The new “complementary currency” then spread to most of the rest of the country.
It wasn’t really money, though it appeared to be, but rather a kind of bond, a loan from whoever accepted one of the notes to those who issued them, an “IOU” decked out like cash—and as such it even paid an interest of 7% annually. That way, according to the authorities, it not only would be immediately spendable, but also a form of savings —finally the poor too would be able to get rich…
Distribution began by putting the patacón into the pay envelopes of public employees, where it was not viewed with much enthusiasm, but was recognized as being better than the alternative: nothing. For merchants the case was similar. They could either accept it or not sell anything. When even McDonald’s finally bowed to the inevitable it was clear that it had finally entered into circulation, at least for small and mid-sized purchases.
Most important of all though, you could pay your taxes with patacones—which in theory were “worth” pesos that were then, still in theory, “worth” dollars—an aspect that got taxation working again, since flat-broke citizens had largely stopped paying their taxes, another element of similarity with today’s Greece. Obviously, the Argentine government was not over-excited by having to accept “money” that was not in fact worth anything, but from a bookkeeping point of view these scraps of paper were “practically” dollars: an accounting miracle!
The last patacones were finally liquidated in 2006—nominally in pesos, but of course “new” pesos that no longer had the same value of a US dollar. The whole thing was a huge fraud, but an “official government fraud,” one that saved the country, making economic activities once again fluid and allowing political leadership—and the population too, if it comes to that—to go on pretending for a while that things were somehow on the right track.
Brussels is going to love this solution—in these terms it won’t be “Greece” to leave the euro, but only the country’s population—but Greece’s patacón absolutely must not be called a “drachma”, the pre-euro Greek currency. That would be going too far—the idea might get around that perhaps someone had, you know, made an extremely serious error at some point.