ECON III

Committee on Economic and Monetary Affairs III

New Money: With a growing number of local complementary currencies implemented across Europe, what can be the role of these currencies in transitioning to a more sustainable economy, and to what extent should authorities support their implementation?

 

 

 

The Topic in Depth

written by Sacha Magnani (FR)

Money has taken a central place as an economical, social and political instrument. While management of this instrument has long been under the control of the sovereign of a country, the last two centuries have seen the emergence of Central Banks, responsible for monetary policy. In 1992, the EU Member States agreed to be part of the European System of Central Banks (ESCB) -responsible of the EU monetary policy framework- and most of them agreed to join the Euro area and to transfer their full monetary policy competence to the EU. This act, followed by the creation of the European Central Bank (ECB) and the introduction of the Euro in 2001 in most the Member States are seen as one of the main symbols and accomplishments of European integration.

Currently, however, the popularity of the Euro and the ECB among some Europeans have dwindled, due to the handling of different crises, such as austerity policies implemented since the 2008 financial crisis, or the rise of populism in the different Member States. Critique ranges from a lack of democracy in the decision-making process of the ECB to the feeling of the common currency being far away from the “real economy” and people’s expectations, being closer to investors and stock markets rather than working people and their income . Others also condemn the promotion of globalisation, increasing existing inequalities and not considering climate change enough.

That is why different citizens across the continent have decided to propose independent alternative projects to counteract the Euro and European monetary policy. Through instruments called Local Complementary Currencies (LCCs), these citizens want to change the rules of the game regarding money management and the way money impacts society. LCCs aim to make the operating and decision-making processes of money more democratic. The persons behind the projects also aim to make money an active tool at the service of local development and ecological transition, by helping to create virtuous circles (economically, socially and environmentally) through the development of local distribution channels. Lastly, they want to see economical, social and environmental values attached to their payment instruments. This way, they seek to further a transition of economy and society towards a more sustainable model.

Usually, LCCs are generraly managed by citizens through structures -generally associations- that are generally independent from any public or private institutions. These tools are physically printed “banknotes” at parity with the euro or the national currency (1 unity of LCCs = 1 unity of the national currency) - the difference being that LCCs can only be used in partner companies that are part of a specific network. While existing in printed form, they are not recognized as official currencies within the EU. Only the euro and national currencies have that privilege.

This circumstance does not prevent LCCs from being somewhat accepted and supported by certain public authorities, local and/or national ones. While France legally recognised LLCs in 2014 as tools for local development tools, other territories support them financially, by helping fund projects. With this public legal or financial support, public institutions can see in LCCs initiatives the opportunity to try to stimulate local economies, thereby supporting environmental transitions and making their territories more resilient. Still, their struggle for general legitimacy has repercussions on the support that these initiatives can gather, as the questionable legal status of a payment instrument leads to individuals doubting instead of rallying for its cause.

Among the problems LCCs face is the clash between their raison d’être and the environment of their implementation. Sometimes just critical of the current economic system and other times outright hostile to it, LLCs projects nevertheless attempt to bring about a profound societal change from within.This often leads to a misunderstanding of the purpose of these projects by citizens, economic actors or public authorities, which is in part also due to LCC projects not being uniform wherever they are implemented. In addition, it is difficult to evaluate the real impacts and benefits of the projects.

Seeing the ever-increasing number of citizen alternatives of currencies at a local scale, this cannot go unanswered forever. While probably not the direct result of LCCs, the ECB president called for a change of ECB Statutes. Could this be the impulse needed for a new age of dynamic European monetary policy, more sustainable and closer to citizens?

 

Topic Content

created by Christina Velisaridou (GR)

 

Food for Thought

How should the EU, the ECB and national institutions respond to the citizens’ desire to have some control over their currency and thereby the economy?

What position should the EU take regarding LLCs? Should the EU and the ECB change their stance regarding the recognition of official currencies?

Can LCCs be a part of EU economic and monetary policies as tools to help local development?

How can the idea behind the LCCs and their independence be ensured if they are integrated into EU policies or if larger stakeholders take interest in them?

In which ways can LCCs be part of the solution to a more sustainable and resilient society?

Can they work in transnational regions that are more coherent economically and socially?

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