As Economies Struggle, Alternative Currencies Rise in Europe

by Tristan Hugo-Webb 0

As poor economic conditions persist acrossEurope, more and more local communities are embracing alternativecurrencies as a major secondary payment options, if not thepreferred currency overall. From Germany to Spain to Greece, theausterity measures implemented by governments have hit Europeanshard, Greeks in particular, losing up to 40 percent of theirdisposable income as cuts take effect. While alternative currenciesare not a new phenomenon, the economic struggles of Eurozonemembers have given rise to a number of different paymentsubstitutes as well as growing popularity among alternativecurrency initiatives.

In Germany, a currency that was once a school project has quicklybecome one of the world’s most successful alternative currencysolutions. Although the traditional payment substitute predatesEurope’s recent economic woes, the “chiemgauer” (as it is referredto by the locals) has seen use and turnover grow rapidly in recentyears. From 130 individuals and turnover of $99,300 in 2003, thealternative currency has grown to nearly 2,500 individuals andturnover of some $8 million in 2011. Fixed at a conversion rate of1:1 to the Euro, the chiemgauer is only valid for three months oncegained, encouraging holders to spend rather than save the novelcurrency. Furthermore, the currency has become so popular in theregion that chiemgauer users can pay for goods and services throughtheir debit card.

In Spain, the economic crisis has led to a proliferation ofso-called “time banks,” which allows customers to barter servicesby the hour. According to Vivir Sin Empleo, the number of timebanks has jumped to nearly 300 with membership ranging from a fewdozen to several thousand in the larger cities. José Luis ÁlvarezArce, director of the economics department at the University ofNavarra, says that these time banks and alternative currencies area force of good, “people who can’t find work, these kinds ofpossibilities of exchanges and mutual help can help make bearable asituation that otherwise would be unsustainable.” Many of the timebanks operate like their more traditional counterparts withindividual accounts, ledgers, and checkbooks and, in some cases,auditors that ensure the activities are being monitored. However,not everyone is enamored. José García Montalvo, an economicsprofessor at the University of Pompeu Fabra in Barcelona, believesthese new payment solutions hurt Spain. “It’s a step backward notonly for a euro country, but also for a developed country,” hesays.

Lastly, in Greece, one of the Eurozone members most affected bythe economic downturn, the city of Volos has witnessed the rapidgrowth of the local alternative currency, Tem. Users are able toexchange goods and services in the same manner of traditionalpayment options, but no money ever exchanges hands. The currency’ssuccess is evident in its growing membership numbers. In the pasttwo years, users have grown from a few hundred to well over a1,000. Yiannis Grigoriou, one of the network’s founders, says theTem is about more than just money. “For many it plays a double roleof supplementing lost income and creating a protective web at thisparticularly difficult moment in their lives,” he said.

While the alternative currencies developed in Europe are not aimingto remove the Euro from circulation entirely, but rather supportlocal communities and the business within them, the real questionis will these alternative currencies maintain support when economicconditions improve. The mayor of Volos, Panos Skotiniotis, believesthe Tem is sustainable and that it does more for the community thanthe Euro. “It won’t ever replace the euro but it is really helpingweaker members of our society. In all the social and culturalactivities of the municipality, we are encouraging the Tem to beused,” he says.

Alternative currencies have a history of failure and mediocresuccess. While none of the solutions mentioned here or around theworld will likely challenge mainstream payments, traditionalfinancial institutions and larger merchants can still benefit fromsupporting initiatives like the chiemgauer or Tem. Alternativecurrencies help communities increase opportunities to reachunderbanked or unbanked populations more effectively. If thealternative currency fails, the aforementioned populations are morelikely turn to traditional banking options.