Euro or Drachma? Or Both? A Plea for a Parallel Currency Concept
NEW YORK, April. 17, 2013 – Wolfgang Richter and Carlos Abadi today published a paper entitled Euro or Drachma? Or Both? A plea for a parallel currency concept. The paper discusses the temporarily introduction of parallel currencies in distressed Eurozone (EZ) countries as a means of restoring economic growth and stability. The paper was co-authored by Rafael de Arce Borda, Professor of Econometrics at Universidad Autónoma de Madrid. Massi Ibrahim and George Nixon also contributed to the paper.
The parallel currency concept contemplated in the paper allows distressed peripheral euro states to achieve the benefits of instant devaluation whilst remaining within the EZ and provides a defined schedule for full reintroduction of the euro as sole legal tender. The parallel currency concept expands the euro crisis debate by putting forth a constructive, practical alternative to internal devaluation and EZ exit policies – both of which have significant downsides. The paper uses Greece as a test case in order to model the parallel currency concept.
Both Dr. Richter and Mr. Abadi have been actively involved in the euro crisis debate. In 2012 Dr. Richter, based in Berlin, and Mr. Abadi, based in NY, led a European roundtable series, attended by European business leaders and policymakers and organized by DLA Piper, to discuss the crisis in Europe and potential opportunities, outcomes, and solutions. In November of 2012 Mr. Abadi was invited by The New School and the United Nations Association of the United States to join a panel of distinguished academics and industry professionals to discuss the EU sovereign debt crisis. Drawing upon his extensive personal and professional experience of the Latin American debt crises of the 1980s and 90s, Mr. Abadi has offered comparisons between this crisis and the current European situation and highlighted lessons that can be learnt from Latin America’s experience.
As a firm, ACGM is involved in a number of financial transactions and advisory assignments that have arisen out of the euro crisis. The firm’s European expertise and high profile US customer base have enabled ACGM to position itself in the burgeoning market for European distressed assets. In addition, amidst the increasing capital requirements faced by European banks, ACGM has been working on developing compelling solutions for enabling European banks to meet new capital requirements whilst minimizing cost of capital, and doing so in adverse environments through its Consolidated Affiliate Model (“CAM”). The Financial Times has discussed the CAM model as a potential alternative to the “CoCo” note (see here).
The full parallel currency paper can be accessed by clicking here
An abridged version of the paper was recently published by EconoMonitor (A Roubini Global Economics Project) and can be accessed on their site by clicking here
About Abadi & Co.
Founded in 1991, Abadi & Co. is an investment banking boutique which specializes in three core areas: emerging markets, financial institutions and restructuring & special situations. By focusing on these three areas of expertise, Abadi & Co. has built a team of independent specialists–Fluent in Finance®–who serve as powerful advocates for clients, focused on protecting their financial interests and delivering practical, high-value financial solutions. The Abadi & Co. team prides itself on its ability to guide clients through difficult and groundbreaking transactions, even in situations where the structuring complexities and challenges would have thwarted others.
Abadi & Co.’s experienced team works on a range of transactions, including mergers & acquisitions, debt & equity capital markets issues and recapitalizations. It caters to a global client base which includes companies, governments and financial institutions, across North America, Latin America, Europe and the Middle East. The firm’s specialization approach means that it only takes on engagements if they fall within one or more of its core areas of expertise, allowing it to assign a strong team to every engagement, providing clients with the attention and intellectual capital they deserve. The firm’s clients appreciate having direct access to a senior banker 24/7; they value the discretion of Abadi & Co.'s smaller team and are relieved of the conflict of interest concerns inherent in working with larger investment banks, which often look to cross-sell other products and services. In order to prevent conflicts of interest, and to ensure the independence of the firm's advice, Abadi & Co. does not conduct trading or manage investments.
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