April 18, 2017 – Il Sole 24 Ore published an editorial co-authored by SEP Senior Fellow Lorenzo Codogno, in which he discusses the Five Star movement’s proposal for a parallel currency. The idea is simple—the government would issue “credit certificates” that more or less behave like short-term government-issued bonds, allowing them to be used like money. According to its proponents, this parallel currency would allow the government to spend more, while conforming with European regulations regarding deficit spending. However, according to the authors, this magic bullet is completely impractical in real terms. For one, the European Central Bank is the sole issuer of bank notes and bank reserves, and introducing a separate currency would go against the fundamental principal behind the euro. To this, the Five Star movement would argue that the certificates would have no legal value as a currency, thereby allowing its existence within the rules. However, in this case, the certificates would have to be considered as bonds and would thus count against the government’s debt balance, the very problem the proposal is trying to skirt.
- The original article (in Italian) is available from Il Sole 24 Ore.