IOU’s seem unavoidable solution for #Greek liquidity problems as discussed by Cochrane and GS

Domestic financial obligations would be met with the issuance of IOUs. Were its fiscal primary balance to remain positive, the Greek government could meet expenditures from current revenue (while allowing its debt service to fall into arrears, as with external obligations). But we are sceptical that the new Greek government will maintain a primary surplus, in a context where the economic recovery has stalled, tax revenues are declining, privatisation has been halted and electoral promises for higher spending will need to be fulfilled. In that case, the fiscal deficit could be covered by issuing IOUs: for example, pensioners, public employees and government contractors could all be paid in ‘scrip’, which could then be used for further transactions. (To put it another way, these IOUs would likely act as a nascent parallel currency circulating alongside the remaining Euro banknotes in Greece)

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