This is a short update to today’s blog. I had a discussion today with a good friend who owns a significant private firm in Europe which is at the forefront of delivering innovative card payment services to banks and corporations throughout the Eurozone. He is an expert in IT solutions, has one of the best understandings of the technical structure of the financial system and the computer systems that support it. That is how he makes his living. He offered the following short additions to my blog. His knowledge is impeccable and his insights valuable.
He provided three excellent insights concerning the Naked Capitalism article.
First, while a Grexit is surely a major undertaking what the Naked Capitalism author clearly fails to mention (and probably doesn’t know) is that the Euro was integrated ‘on-top’ of the existing legacy IT payment systems.
So for instance the payment gateways still support the Greek Drachma (GRD) as a currency. So ‘switching’ the Drachma back on would not be such a major task. The same is true for major acquirers and banks.
Second, my friend suggests that the Grexit should be accomplished by stealth. He would leave everything in place as it is for now. Then establish, in secret, a public bank (like the German KfW), procure the banking software out-of-the-box, sign a contract with a major card-scheme to use its network for transactions and hook the bank up with the official Bank of Greece, the nation’s central bank.
Once ready the Greek government would announce that any legal entity in Greece has a Drachma account at this bank. Everybody would then receive their Online Banking credentials and Drachma Maestro/Vpay debit card in the following week.
Then the government would look for vital services and/or taxes to define where Drachma payment would be mandatory. Ideal targets include public transport and perhaps a Fee for foreign exchange transaction to facilitate imports.
Third, my friend suggests that the Greek government would be advised not to issue cash. That is, to make the new Drachma a digital currency only.
The reason for this is that Greeks are notorious at evading taxes, a fact that has been well documented. He reports that Greece is the country with the lowest rate of cashless transactions in the European Union.
It is not stretching the truth to suggest it is already very much a cash society. Therefore given that he suggests that the best way to enforce tax compliance is to monitor it gently via digital transactions only.
Those comments come from someone who is dealing in these matters with very large transactions on a daily basis.
Once again, I conclude that an exit would not be rocket science and the IT issues are fairly trivial. So why is Naked Capitalism supported those who clearly haven’t the first-hand knowledge and are using literature to make their case which is old (1999) and written to cover a different situation entirely?