Regional Currencies: A Key Development Tool
With the free movement of capital, money saved or spent in a region is increasingly being invested elsewhere. Some places benefit by attracting influxes of investment (and by consequence employment and development), but the losers are many, even in Europe: deserted by capital, the latter lack development prospects as businesses struggle to find access to credit.
This issue is becoming particularly heated today; in the wake of the financial crisis, when access to credit in the traditional banking system will continue to dry up, causing growth problems and threatening the very survival of many productive sectors. It is therefore urgent to act in order to promote alternative channels in the financial sector.
Local and Regional currencies offer one such channel. These projects are starting to make waves, notably in Germany. However, the field remains relatively unknown, the experiments are scattered, and rumours are numerous.
The Committee of Regions: A Central Actor for a New Tool
Ushering in an institutional dynamic on the scale of the continent, the EU could play a key rule in the dissemination of this regional development tool. We therefore propose that the Committee of Regions seize the opportunity to put regional money on its agenda; the committee could, for example, set up a permanent committee responsible for collecting and distributing data and best practices across Europe. It could also organise a network of experts to oversee and evaluate ongoing experiments.
Aside from the sharing of information concerning best practices and past experiences, the Committee of Regions should also assume the role of a forum for debate, notably with financial actors. The lack of confidence in regional monies remains palpable in this field, notably on the side of central banks who seem to see a threat to the national/European monopoly. This lack of confidence is unjustified, given that all experience shows that these currencies do not threaten the euro: rather than replace official currency they create a complementary instrument, better designed to respond to one of the key problems caused by globalisation.
The goal is not to opt-out of globalisation, but to compensate for its drawbacks. It is not a question of isolating regions from wider economic circuits to create autarkic units. Autarky, in our contemporary world, is neither feasible nor desirable. Moreover, regional currencies offer an intermediary between autarky and the complete relinquishing of local control.
Finally, and perhaps most important in the context of the current credit crunch: the strategy recommended here will help reduce the economic and social costs to the regions. More than simply hoping that the European Central Bank will resolve all its financial problems, the regions themselves could play a much more active role in managing the crisis. A quantitative study has demonstrated the stabilising macroeconomic effect of complimentary currencies. In the case of a recession, the volume and use of these currencies has a tendency to rise, facilitating trade that would otherwise not take place, and in doing so, reduces the social and economic fallout on the population.
In the context of the economic and financial crisis, let the regions play an active role by allowing them to use regional currencies, complementary to the euro, in order to reduce the economic and social consequences of the credit crunch. For this, the Committee of Regions needs to act on this question by inviting the different stakeholders (regions, the financial sector, etc.) in order to allow for the exchange of information and to initiate a background debate on the role of regional currencies.
Author : Challenge for Europe