Wolfgang Richter Discusses a Parallel Currency Solution to Peripheral Europe’s Woes, Writing in Germany’s Frankfurter Allgemeine Zeitung
New York, NY. – Dr. Wolfgang Richter, ACGM’s Senior Advisor and European Representative, and Rafael de Arce Borda, Professor of Econometrics at Universidad Autónoma de Madrid, today published an article in Germany’s Frankfurter Allgemeine newspaper discussing a parallel currency solution to peripheral Europe’s economic woes. This article follows the publication of a paper entitled “Euro or Drachma? Or Both? A Plea for a Parallel Currency Concept”, in April 2013.
Dr. Richter and Mr. de Arce Borda explain the parallel currency concept using a cruise ship named “Peripheria” to represent a peripheral European nation. They also apply the parallel currency concept in the context of the current Portuguese situation. The parallel currency concept allows distressed peripheral euro zone states to achieve the benefits of instant devaluation whilst remaining within the euro zone, through the introduction of a parallel currency, and provides a defined schedule for full reintroduction of the euro as sole legal tender.
The parallel currency solution provides a less painful alternative to the austerity approach which has dominated conventional discourse. Most politicians and commentators have ignored the parallel currency concept and only offered internal devaluation via austerity and a euro zone exit as solutions for peripheral euro zone nations in crisis.
The parallel currency concept allows external devaluation with respect to future value creation and would enable the peripheral countries to pay off their debts by generating an adequate primary surplus, through increased international price competitiveness and resulting improvements in overall economic health. This is something that existing austerity policies have failed to achieve. None of the peripheral countries have been able to reduce their debt ratio - on the contrary, they continue to rise.
Dr. Richter and Carlos Abadi, ACGM’s President and CEO, 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 full Frankfurter Allgemeine newspaper article can be accessed by clicking here Download PDF
Frankfurter Allgemeine subscribers can also access the article here.
The full parallel currency paper can be accessed by clicking here Download PDF
An abridged version of the paper was published by EconoMonitor (A Roubini Global Economics Project) and can be accessed on their site 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.
For further information about Abadi & Co., please visit