Excerpted from Don Quijones:
“Over the next six months, Barcelona’s left-wing city council plans to roll out a cash-less local currency that has the potential to become the largest of its kind in the world. The main goal of the project, according to a council spokesperson, is to boost economic opportunities for local businesses and traders.
The idea is for local stores and residents to be able to exchange euros for the new currency at a one-to-one parity, and use it to purchase products and services at a discount or with other kinds of incentives. But it doesn’t end there: the new parallel currency may also be used to pay certain subsidies, taxes and local services such as public transport, reports El País. Municipal workers could also receive part of their salary in the new money.
Barcelona will not be the first European city to launch such a scheme. Local currencies are all the rage these days. There could be as many as 3,000 forms of local money in use around the globe, says Community Currencies in Action, a global partnership promoting such schemes that is part-funded by the European Union’s Regional Development Fund.
While the Bristol Pound experiment has been a big success on a tiny scale, Barcelona’s move toward adopting its own currency is a proposition of a whole different magnitude. With a metropolitan population of 3.2 million people, Barcelona would be far and away the largest city council in the West to trial such a scheme. The council is also proposing using the currency to pay some salaries, social benefits and public services, which could propel the amount in circulation well into the millions, if not billions of euros.
Predictably,the opposition to the scheme in Madrid is fierce. In June, the Bank of Spain’s deputy governor Fernando Restoy delivered a shot across the bow by warning that the scheme proposed by Barcelona’s activist mayor, Ada Colau, was “impossible” as well as “undesirable.”
To launch its own currency Barcelona City Council would have to go directly against the wishes of both national regulators and the central government. It would hardly be the first time in history that it had. Indeed, many of the leading figures of Catalonia’s pro-independence movement, including the region’s premier, Artur Mas, have already called for mass civil disobedience of Madrid. And there are few more potent acts of disobedience than the creation of one’s own currency.
Which begs the question: could Barcelona’s local city currency serve as a springboard to a region-wide parallel currency? After all, if Catalonia’s leaders are genuinely serious about breaking away from Madrid and creating a new nation-state (still a sizable”IF”), they will need to dramatically reduce Catalonia’s financial dependence on the central government’s treasury, the Bank of Spain and by extension, the European Central Bank. The only way to do that is to launch its own currency. As Greece’s Syriza party learnt the hard way, it’s no good threatening to go your own way without first having a parallel currency in place.
Granted, this is the grandaddy of all nuclear options. It is far more likely that Colau’s primary motive in launching a community currency on this scale is somewhat more mundane: i.e. increase local government spending. It’s what she pledged to do before the municipal elections. And there’s no easier way of increasing government spending than printing your own money and then using it to pay salaries, benefits and public services!
The big challenge will be getting local people and local businesses to trust the new form of money, as well as finding a local financial institution willing to back it up with euros. Without that, the currency could lose credibility. Without credibility and trust, fiat money loses value very quickly. And that’s when seemingly easy solutions give way to excruciating pain.”