Greece should quit the euro, revive the drachma and slap penalties on those who try to avoid holding the new currency.
The analysis of a Wall Street economist or a secret plan hatched by European policy makers? No, it’s the proposal of an 11-year-old Dutch boy seeking the second-largest cash award in economics after the Nobel Prize.
Jurre Hermans of Breedenbroek, about 157 kilometers (98 miles) southeast of Amsterdam, was today awarded a 100-euro ($133) gift voucher for his effort to win the Wolfson Economics Prize aimed at finding ideas for how Europe can best enjoy economic progress even if a country leaves the single currency.
“I thought the Greek problems were too big and should be solved,” Hermans said in a telephone interview today with his father, Julius, translating. The crisis will continue because “Greece still has too many debts,” he said.
His proposal, complete with a drawing that includes a sad Greek person, suggested Greece leave the euro and force its citizens to use an “exchange machine” to transfer their euros into drachmas. The euros would then be used by the government to pay back its euro-denominated debts, with Hermans using pizza in an analogy to illustrate his idea.
Slice of Pizza
“Everyone who has a debt gets a slice of the pizza,” the boy, who was 10 when he entered the competition, wrote in his submission. “You see that all these euros in the pizzas go the companies and banks who have given loans in Greece.”
Realizing consumers and companies may balk at holding the new drachma because it “will lose its value dramatically,” Hermans said those trying to retain euros will “get a penalty just as high or double as the whole amount in euros he tried to hide!!!”
“In this way I ensure that all Greeks bring their euros to a Greek bank and so the Greek government can pay back all the debts,” he wrote. “Of course, if a country has paid back all his debts, he can return to the euro zone.”
In suggesting Greece quit the single currency after more than two years of crisis-fighting, Hermans aligned himself with economists including Nobel laureate Paul Krugman and Nouriel Roubini of Roubini Global Economics LLC. He wrote in his page-long submission that he loved animals and playing with his five friends. He hopes to be a zoo director when he grows up.
His proposal, one of 425 entries, wasn’t enough to secure a position on the five-strong shortlist for the prize, the winner of which will get almost 200,000 pounds ($320,280). Roger Bootle of Capital Economics Ltd. and Nomura Holdings Inc.’s Jens Nordvig were among those named as finalists. The shortlist also includes Neil Record of Record Currency Management, Jonathan Tepper of Variant Perception and Cathy Dobbs, a private trader. A winner will be declared on July 5.
“Sadly, the risk of a country leaving the euro zone has not gone away,” Simon Wolfson, chief executive officer of retailer Next Plc, whose family trust is sponsoring the award, said in a statement. “The ideas contained in these entries are an invaluable contribution to tackling this important issue.”
Bootle, the founder of London-based Capital, and colleagues proposed countries accept devaluation as part of the crisis solution and embrace it sooner rather than later. Dobbs focused on preventing capital flight by ensuring equal treatment of bond contracts.
Nordvig, a managing director of currency research at Nomura in New York, and Nick Firoozye, head of interest-rate strategy at Nomura, argued that the key will be addressing 10 trillion euros of foreign debt. Record advocated a German-led taskforce prepare a plan in secret to abandon the euro once any member leaves it. Tepper said currency zones break up all the time and what matters is the reason a nation wants to leave.