Beppe Grillo's Blog

Text of the interview.

"Today I'm going to try to shed some light on what is one of the most strongly denied monetary policies out there, namely the establishment of a so-called Euro 2, of a monetary split within the European currency zone that would result in the introduction of a second currency unit, providing for the circulation of two currencies within certain Countries.
Those of you who read my 2006 economic essay entitled "Tough and pure, awaiting the new 1929" will remember that, on the cover, there was a picture of a Euro coin breaking in two. Many readers asked me at the time: "But why didn't you use the Dollar instead of the Euro, wouldn't it have been more justified considering what happened thereafter?"
No it wouldn't, because the original idea was precisely that a Euro 2 could be created within the Euro zone, a second, so-called baby currency that could be used in certain Countries. But which Countries are these precisely? They are the so-called PIGS (Portugal, Italy, Ireland, Greece and Spain), to which I would add Malta and Cyprus. But why have a Euro 2? Because, 10 years after the birth of the Euro, we are beginning to realise that the European Union was born as a result of extreme pressures and forces that were senseless and bordering on criminal because a number of Countries, ours amongst them, are forced to deal with structural deficits that will be difficult to overcome even in the long term.
The famous Maastricht parameters have now been relegated to history because, in the past two years, almost everyone, from Germany through to Greece, has exceeded them. What use is a Europe in which the economic harmonisation process that should have demanded standardisation in terms of the ratio of public debt to GDP and then resorting to budget deficits in order to keep the Countries afloat, when we are faced with a huge question mark with regard to Greece, namely, "Will Greece manage to save itself by re-defining its tax system or will the Country be saved by Germany acting in concert with other Countries?" This is a real worry for the financial markets, but there is more. If Greece was to be bailed out, it would create a precedent. Down the line, Spain would also have to be bailed out and perhaps Ireland too, and don't forget about Italy? Except that from an economic point of view, Greece is a relatively minor problem. The biggest question mark hangs over Italy and Spain because there simply aren't sufficient available resources to bail them out too. That is why the financial markets are particularly nervous, both about trading in Government bonds and about the trend in the Euro-Dollar exchange rate, which has become the real driving force behind the financial engines and the reason for the so-called "mini-recovery" that we witnessed until a month ago, which was precisely due to the Euro-Dollar exchange trend. After all that has happened (to Greece, Ed.), the Euro - Dollar exchange rate narrowed significantly and, from a high of 1.50, it is expected that it could drop as low as 1.30 or even 1.25. The financial markets are anxiously looking at the future of Europe compared to that of the United States of America because of the structural differences as regards the deficits, the growth and the credibility of European Countries.
The Euro is a disguised currency, a currency that the Germans wanted and indeed demanded because Germany was a Country with great potential for exports, particularly to other European Countries, and therefore needed a currency that was strong and a fixed exchange rate that would ensure commercial stability.
The potential of Countries such as Italy, Spain and Greece, however, is very different to that of Germany. For example, Italy exports far more product outside of the European Union than Germany does and would need a competitive currency, which is precisely what is happening in China at the moment, where the Yuan is kept devalued in order to make Chinese exports more attractive.
In these terms, we have to rethink our monetary policy for a number of European Countries and that is why the idea of a so-called Euro 2 is beginning to emerge, in other words to split the current Euro, thus creating a new currency unit. However, we must keep in mind that, for this very reason, one of the first Countries that would oppose such a move would be Germany, which would find itself faced with partners whose potential and appeal would make life difficult for Germany. The introduction of the Euro created many additional benefits for certain Countries, but it also put incredible strain on the account books of other Countries and that is why the markets are now rather dubious about the future of Europe and the Euro. Greece with its 0.3 trillion Euro debt is a joke. The Country could easily be bailed out by means of a joint intervention by the other European Countries, but what about a Country such as Spain? Or Italy for that matter. Who will bail them out?"

Ok, get out the dissecting tray, microscopes and scalpels!