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No Grexit, No Grexident. The IOUs are coming…!?

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*


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  1. Start printing New Dracmas instead of IOUs

  2. Henri Myllyniemi

    As the Reuters reports correctly, defaulting inside Euro can be problematic, because The ECB simply must acknowledge Greek banks are not solvent either – they are creditors of Greece and would become undercapitalised. In such scenario – should it happen – The ECB must cease licenses for ELA-funding.
    But it amazes me to see people think that Greece could pay these debts if being a Euro country, but not outside the EMU. Maybe they add something on the tap water to make people believe that these debts are repayable under current ruleset of The ECB.
    For the matter of IOU’s for pensions and civil servants’ salaries: it could be structured e.g. 50-50 principle.

    • keeptalkinggreece

      exactly the same question here: impossible to repay the debt in eurozone but possible outside?
      that’s for the 50:50 explanation.
      ps we may also take the audience’s help (bail-in) or call a friend (Russia or China) 🙂

      • Henri Myllyniemi

        Umm, someone thinks debts are no problem inside the euro area, but impossible outside…
        About geopolitical point of view. There is no significant other reason why would The US president Obama pushing Germany for a deal. Greece has been a NATO-country before Germany and Greece is fulfilling the requirements of NATO – I believe this is unique in Europe.
        Geopolitical location is also quite tense close to the EU’s “Greecenmost corner”: Syria, Yemen, Northern-Africa…
        I don’t believe the rest of EU wish for another overboiling kettle on its backyard.

  3. But in case of steady outflow of money from the banks and lack of money in the budget, capital controls and potentially IOUs can be the best solution. Why is it scaremongering ? It is a normal method of regulation of the mess. Either drachma / parallel currency and massive devaluation, or capital controls and IOUs , or additional money from the EU to continue paying the debt and (like Soros said) further muddling through. The problem is : at time of Samaras there was no bank run and more money in the budget, now muddling through is less and less probable (although probably it is still the most probable option).

  4. Gerrit Zeilemaker

    I do’nt trust those anonymous euro zone officials either, but there is an other source with simular ideas I trust more:
    Time for a discussion!

  5. We had something similiar in Argentina after the 2001 economic disaster. Some useless form of currency that made the situation more humiliating. They even paid salaries with it.

    Sad as it is, and horrendously hard as it may be, defaulting on its debts and getting out of the euro might be something Greece should consider doing. It’s high time government officials start thinking about it, and preparing the public for it. Regardless of the options and actions taken, the debt is unpayable in the near future, and it may take about a decade to stand up again, so why suffer even further, juggling with meetings and begging for the EU masters’ approval when they are unwilling to give any, much less any additional money, to the country?

    On top of defaulting, I think the money from the WWII reparations (which Greece ought to get from Germany, at all costs) would be a great incentive to help the people in their struggle out of the EU and the euro, and into an independent and free path of economic recovery.

    Anyways, it’s just a thought. I’ve no idea how the government might implement such drastic changes, except in the same way all the austerity measures have been implemented by previous ones…

  6. Why do the Europeans not understand that with Euro or IOUs, Greece just cannot repay their bailout right now; they can’t even feed & pay their own people. Give them some breathing space to get the Greek people & the country back on its feet. Then we can discuss Finance – greedy & insensitive Europeans.
    Tsipras should leave the Humanitarian crisis off the table & bring out Greece’s strategic & geographical card. That may sensitise them.

    • Exactly, Greece needs to realize that the EU elites will continue to plunder its people and resources until Greece ups the ante by playing the East against the West. I think we are nearly the moment of truth.

  7. IOUs, Drachma, Euros or any other paper has no value unless it is trusted.

    • Money has no value, in any shape or form. The only “value” money has is that it is an simplified bartering tool, making bertering easier. nothing more, nothing less. the rest is Alice in Wonderland stuff, including the mushrooms that make it grow…

  8. the best is to get Money from the Chinese as Venuzuela get now.
    in this Country are the supermarkeds empty, Inflation is by 68%, and they have also a socialist goverment.

  9. How much blood can be drained from the Greek people before they say no more? The endgame has nearly been reached. This IOU idea is a definite sign.

  10. .Capital Controls coming very soon . If I was a Greek in Greece , I would withdraw everything I could

  11. The article that helps explain what’s happening is on, greece-prepares-to-leave (not sure the link will get through).

    Remember what Karl Denninger says, the bank that makes a loan to someone that can’t possibly pay it back is the guilty party (as in, not Greece but the ECB & all others).
    As far as paying it back, try the ‘base’ case of: 100 years at 0% interest (~350 billion total right now). Now, double that and it’s 50 years at 0%. Do the numbers work? 100 years= 3.5B/yr, 50years = 7B/yr + 3.5B/yr @1% interest.
    It also needs to be banged into everybody’s thick skull that ALL central bank assumptions assume ~3-5% inflation every year (publicly they say 2%), FOREVER. This currently is not working out so well (MUST… INFLATE… DEBT… AWAY… AT ALL COST).
    Also, I hope Greece makes good use of the non-Nazi/non-terrorist supporting Eastern sphere. How far the West has fallen and still we fall faster and faster (Yemen now), will we ever hit bottom?
    Best if Greece detaches/uncouples from the Western train to Hell.

  12. Gerrit Zeilemaker

    Your contact is not working so I try it here. The Netherlands’ tax regime is enabling a Canadian gold mining company to pay less tax in Greece, a report by a Dutch foundation concluded Monday (30 March).
    Here the link: and here the link for the rapport with video: Have ‘fun’ with it.