IDEAS home Printed from https://ideas.repec.org/p/rtv/ceisrp/68.html
   My bibliography  Save this paper

Parallel Monies, Parallel Debt: Lessons from the EMU and Options for the New EU

Author

Listed:
  • Giorgio Basevi

    (University of Bologna - Department of Economics)

  • Lorenzo Pecchi

    (University of Rome II)

  • Gustavo Piga

    (University of Rome II)

Abstract

In 1975 Niels Thygesen, together with eight other economists - one of us among them - published in The Economist a "manifesto" proposing a new common currency for Europe (Basevi et al., 1975). His co-operation on this subject was pursued within a smaller group, and resulted in the publication of two reports for the EU Commission (Optica Report '75, Optica Report 1976). The proposal in the "manifesto" was ironically re-titled, by The Economist, "The All Saints' day manifesto for European monetary union". In fact it had been published on 1st November, and the "Saints" should have been, according to The Economist, the European Governments if they had adopted and adhered to the proposal. This amounted to launching a new currency that should have circulated in parallel to the national ones, related to them by flexible exchange rates, due to the constraint that such new currency, the "Europa", had to be kept by an automatic formula at fixed purchasing power. In fact the Europa was to be indexed to the inflation rates in the participating countries, according to the weights of their national currencies in what at that time was called the European Unit of Account. As for the two other reports, Optica '75 proposed again a parallel currency, but less than fully inflation-proof, since its standing in terms of purchasing power would have been the same as that of the currency of the member country with the lowest inflation rate. In the Optica 1976 Report, while reiterating the proposal of a parallel currency along the lines of Optica '75, the focus was on designing a joint management of intra-European exchange rates on the basis of inflation differentials. The proposals contained in the three documents where premature, perhaps visionary. On 7 July 1978 the European Council met in Bremen and drew the lines of the European Monetary System, which started on 13 March 1979, on the basis, among other things, of a new quasi-currency - the European Currency Unit (ECU) - composed of a basket of national currencies. Since then, it took almost twenty years before the euro was introduced, replacing the ECU on 1st January 1999. Comparing the euro to such proposals, we note at least two differences. The euro (a) did not start as a parallel currency, but replaced with a pre-announced schedule the national currencies of the countries participating in the monetary union, and (b) it was not conceived as an automatically inflation-proof currency, but one issued by a Central Bank bound by a monetary policy aimed at price stability.

Suggested Citation

  • Giorgio Basevi & Lorenzo Pecchi & Gustavo Piga, 2005. "Parallel Monies, Parallel Debt: Lessons from the EMU and Options for the New EU," CEIS Research Paper 68, Tor Vergata University, CEIS.
  • Handle: RePEc:rtv:ceisrp:68
    as

    Download full text from publisher

    File URL: http://www.ceistorvergata.it/repec/rpaper/No-68-Basevi-Pecchi-Piga.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mr. Robert T Price, 1997. "The Rationale and Design of Inflation-Indexed Bonds," IMF Working Papers 1997/012, International Monetary Fund.
    2. Falcetti, Elisabetta & Missale, Alessandro, 2002. "Public debt indexation and denomination with an independent central bank," European Economic Review, Elsevier, vol. 46(10), pages 1825-1850, December.
    3. Alessandro Missale, "undated". "Optimal Debt Management with a Stability and Growth Pact," Working Papers 166, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    4. Fabio M. Natalucci & Federico Ravenna, 2002. "The road to adopting the euro: monetary policy and exchange rate regimes in EU candidate countries," International Finance Discussion Papers 741, Board of Governors of the Federal Reserve System (U.S.).
    5. Missale, Alessandro, 1999. "Public Debt Management," OUP Catalogue, Oxford University Press, number 9780198290858.
    6. Gustavo Piga & Giorgio Valente, 2004. "The Term Structure of Interest Rates and the Public Debt Issuance Policy: A Note," CEIS Research Paper 49, Tor Vergata University, CEIS.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bonpasse, Morrison, 2007. "The Single Global Currency - Common Cents for the World (2007 Edition)," MPRA Paper 5879, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alessandro Missale & Francesco Giavazzi, 2003. "Public Debt Management in Brazil," Development Working Papers 178, Centro Studi Luca d'Agliano, University of Milano.
    2. Martin Melecky, 2012. "Choosing The Currency Structure Of Foreign‐Currency Debt: A Review Of Policy Approaches," Journal of International Development, John Wiley & Sons, Ltd., vol. 24(2), pages 133-151, March.
    3. Eduardo Borensztein & Olivier D Jeanne & Paolo Mauro & Jeromin Zettelmeyer & Marcos d Chamon, 2005. "Sovereign Debt Structure for Crisis Prevention," IMF Occasional Papers 237, International Monetary Fund.
    4. Nöh, Lukas, 2019. "Increasing public debt and the role of central bank independence for debt maturities," European Economic Review, Elsevier, vol. 119(C), pages 179-198.
    5. Alessandro Missale, 2012. "Sovereign debt management and fiscal vulnerabilities," BIS Papers chapters, in: Bank for International Settlements (ed.), Threat of fiscal dominance?, volume 65, pages 157-176, Bank for International Settlements.
    6. Mehl, Arnaud & Reynaud, Julien, 2005. "The determinants of "domestic" original sin in emerging market economies," Working Paper Series 560, European Central Bank.
    7. Basil Dalamagas & Stefanos Tantos, 2016. "Optimal Versus Actual Maturity of Government Debt: The Case of Greece," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 66(3), pages 25-52, July-Sept.
    8. Arnaud Mehl & Julien Reynaud, 2008. "Domestic Debt Structures in Emerging Markets : New Empirical Evidence," Post-Print halshs-00332049, HAL.
    9. repec:imf:imfops:237 is not listed on IDEAS
    10. Efthimiadis, Tilemahos & Tsintzos, Panagiotis, 2009. "On Central Bank Transparency, Independence and Public Debt Policy," MPRA Paper 84830, University Library of Munich, Germany, revised 2009.
    11. Gabriele Galati & Kostas Tsatsaronis, 2001. "The impact of the euro on Europe's financial markets," BIS Working Papers 100, Bank for International Settlements.
    12. L. Marattin & P. Paesani & S. Salotti, 2011. "Fiscal shocks, public debt, and long-term interest rate dynamics," Working Papers wp740, Dipartimento Scienze Economiche, Universita' di Bologna.
    13. Corey Garriott & Sophie Lefebvre & Guillaume Nolin & Francisco Rivadeneyra & Adrian Walton, 2020. "Alternative futures for Government of Canada debt management," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 12(4), pages 659-685, January.
    14. Jean-Pierre DANTHINE & Francesco Giavazzi & Ernst-Ludwig von Thadden, 2000. "European Financial Markets After EMU: A First Assessment," FAME Research Paper Series rp13, International Center for Financial Asset Management and Engineering.
    15. Laxton, Douglas & Pesenti, Paolo, 2003. "Monetary rules for small, open, emerging economies," Journal of Monetary Economics, Elsevier, vol. 50(5), pages 1109-1146, July.
    16. Campbell Leith & Eric Leeper, 2016. "Understanding Inflation as a Joint Monetary-Fiscal Phenomenon," Working Papers 2016_01, Business School - Economics, University of Glasgow.
    17. Carlo Favero & Alessandro Missale, 2011. "Sovereign spreads in the Euro Area. Which prospects for a Eurobond?," Working Papers 424, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    18. Mr. Olivier D Jeanne & Ms. Anastasia Guscina, 2006. "Government Debt in Emerging Market Countries: A New Data Set," IMF Working Papers 2006/098, International Monetary Fund.
    19. Lane, Philip R., 2003. "The cyclical behaviour of fiscal policy: evidence from the OECD," Journal of Public Economics, Elsevier, vol. 87(12), pages 2661-2675, December.
    20. Bevilaqua, Afonso S & Garcia, Marcio G P, 2002. "Debt Management in Brazil: Evaluation of the Real Plan and Challenges Ahead," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 7(1), pages 15-35, January.
    21. Faraglia, Elisa & Marcet, Albert & Scott, Andrew, 2010. "In search of a theory of debt management," Journal of Monetary Economics, Elsevier, vol. 57(7), pages 821-836, October.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rtv:ceisrp:68. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/csrotit.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Barbara Piazzi (email available below). General contact details of provider: https://edirc.repec.org/data/csrotit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.