I’ve talked about the Euro crisis with a lot of friends. Many know my strong feelings against the Euro as a political currency for many years. I always get the following question: “what I would do if it were me to decide which direction the Netherlands should take”. My strong suggestion has always been to exit the Euro and start a dual currency at first, where taxes and governmental expenses were collected and paid in the new currency. The current treaties do not say how such an exit should take place, they however do not oppose a country to exit.
Some economists suggest the best way forward is kicking the GIIPS out would solve the situation, this however would bring no solution to countries who have all their debt in the Euro currency. Their new currency would directly depreciate in value against the euro making repayment nearly impossible. (debt issued under local law would be eligible for conversion however).
Strong (hard) asset backing of the new currency would increase trust and therefore increase international acceptance of the new currency. It is likely that the new currency of the Netherlands will appreciate against the euro, this will have a positive effect on government debt repayment. International competition will likely decrease at first, but will likely return due to innovation and price/salary adjustments.
In time, the dual currency will be replaced by a single currency again, this can only be accomplished when cross liabilities with the ECB and other members have been cut. I strongly advice the DNB and members of parliament to start this process while we still can.
