Local German currency could be a model for Greece

BERLIN Mon Nov 7, 2011 10:58am EST

Related Topics

BERLIN (Reuters) - An alternative currency introduced in a wealthy German region as a school project eight years ago has turned into a hot commodity thanks in part to the euro zone crisis with 600 businesses and 3,000 people trading 'Chiemgauers' instead of euros.

The 'Chiemgauer' -- named after the southern Bavaria region around Rosenheim -- comes in paper notes with face values of 1 to 50. The notes are convertible at local shops and have a fixed exchange rate of 1:1 with the euro.

A total of 6 million 'Chiemgauers' have exchanged hands this year in the most rural region near the Austrian border, a 33-percent increase from 2009, according to Christian Gelleri who created the parallel currency in 2003 as a project to promote regional businesses.

That is up from 70,000 'Chiemgauers' that were exchanged by 130 people in the first year 2003 when only a handful of local businesses accepted the euro alternative.

"The basic idea is to link money to the real economy and our aim was to keep money circulating locally," Gelleri, a high school economics teacher, said in a recent interview with ARD television.

"We wanted to help people pay attention to small businesses, the average consumers and keep the money flowing locally. Our idea is that money should serve people and not the other way around," added the teacher who has become a minor celebrity on German TV talk shows this year.

Gelleri's 'Chiemgauer' -- there are now 540,000 notes in circulation -- is just one of 24 alternative currencies that have been set up in German regions.

They pose no threat to replace the euro -- Europe's single currency -- but the increasing popularity of the regional parallel currencies reflects fears among Germans about the stability of the currency that replaced their Deutsche mark in 2002.

"The 'Chiemgauer' is a quaint idea but it can't work on a national level," said Wolfgang Gerke, a banking professor and president of the Bavarian Financial Center think tank.

Gerke has been campaigning for Greece to quit the euro zone and return to the drachma as a way of helping it -- and the euro zone as a whole -- recover from the sovereign debt crisis that has hit the country and the European Union hard.

"The drachma would be, for instance, an official currency and the 'Chiemgauer', of course, isn't," Gerke added.

While the 'Chiemgauer' might seem like a humorous idea to most, others have actually studied the success of the regional currency and said it could possibly serve as a model for Greece, whose sovereign debt crisis has sparked an EU-wide crisis.

A German economics professor named Eckhard Behrens said if a currency like the 'Chiemgauer' were introduced it could perhaps help Greece. It could help stimulate the local economy, Behrens wrote in a contribution for a weekly newspaper Das Goetheanum.

"Greece needs a regional currency (like the Chiemgauer) to propel the economy without creating more foreign debt -- more turnover with a regional currency would lead to more employment, less social spending and more tax revenues," Behrens writes.

The backers of the 'Chiemgauer', which has begun to attract national media attention as the euro zone debt crisis worsens, insist that there is no anti-euro or nationalist sentiment behind the idea.

The currency was created as a 10th grade school project by Gelleri as a means to support the businesses of the Chiemgau region. It has negative interest rates and begins to lose value -- 2 percent every three months -- if not used again within three months.

Gelleri said those negative interest rates keep the money moving rather than being kept idle by being stashed away in savings. Shops have to pay a small fee to use the 'Chiemgauer' and profits are donated to charity.

(Reporting By Natalia Drozdiak, editing by Paul Casciato)

FILED UNDER: