Ireland reprinting the Punt?

Irish Currency of the ‘Punt’ ceased circulation in February of 2002

The Belfast Telegraph on September 26th ran an article, Euro zone crisis: Ireland denies secretly printing old currency, which alleged that the ferocity of the rumour was so powerful that parliament had to address the issue directly with the ROI Minister of Finance, Michael Noonan. If the rumour is indeed true and the punt goes back into circulation, the implications for Ireland and its European Union membership could be catastrophic.

“In response, Mr Noonan said: “Irish pound bank notes were last produced   in  2001. Euro notes and coins came into circulation on January 1, 2002.   Irish  pound bank notes ceased to be legal tender on 9 February, 2002.”
The article in the Belfast Telegraph begs the question: How many other EU members struggling to repay debts are considering this option? Are they learning some financial lessons from Argentina’s financial crisis in 2001 as mentioned in a November 3rd CNN article Greek Tragedy has echoes of Argentina?

Argentinian Financial Crisis Timeline 2001 

 The Argentine Financial Crisis: A Chronology of Events

by J. F. Hornbeck, Specialist in International Trade and Finance Foreign Affairs, Defense, and Trade Division

  • January 12 Argentina’s continued poor economic performance prompts the IMF to augment the March 10, 2000 agreement by $7.0 billion as part of a $40 billion assistance package involving the Inter-American Development Bank, the World Bank, Spain, and private lenders. The agreement assumes GDP will grow at a rate of 2.5% in 2001 (versus actual decline of 5.0%).
  • March 19 Domingo Cavallo, Minister of Economy under Menem and architect of the currency board ten years earlier, replaces Ricardo Lopez Murphy, who resigns as Minister of Economy.
  • June 16-17 The de la Rua government announces a $29.5 billion voluntary debt restructuring in which short-term debt is exchanged for new debt with longer maturities and higher interest rates.
  • June 19 The peso exchange rate for merchandise trade is priced at a 50/50 dollareuro peg, effectively allowing a 7% devaluation for foreign trade in hopes of improving Argentina’s international competitiveness. Many analysts raise concern over the effects on the credibility of the convertibility regime.
  • July 10 Cavallo announces a plan to balance budget, but the markets react negatively, expressing lack of confidence.
  • July 19 Unions call a nationwide strike to protest government austerity plan.
  • July 29 The Argentine Congress passes “Zero Deficit Law,” requiring a balanced budget by the fourth quarter of 2001.
  • September 7 Based on Argentina’s commitment to implement the “Zero Deficit Law” immediately, the IMF augments its March 10, 2000 agreement for a second time, increasing lending commitment by another $7.2 billion.
  • October The use of provincial bonds as “scrip” to pay public salaries becomes more widespread as federal revenue transfers decline.
  • October 14 The opposition Peronist Party wins control of both chambers of Congress in mid-term elections.
  • November 6 Argentina conducts a second debt swap, exchanging $60 billion of bonds with an average interest rate of 11-12% for extended maturity notes carrying only7% interest rate. International bond rating agencies consider it an effective default.
  • November 30 A run on the banks begins, with central bank reserves falling by $2 billion in one day. President de la Rua imposes $1,000 per month limitation on personal bank withdrawals.
  • December 1 Protests begin over bank withdrawal limitations.
  • December 5 The IMF withholds $1.24 billion loan installment, citing Argentina’s repeated inability to meet fiscal targets.
  • December 7 Argentina announces it can no longer guarantee payment on foreign debt.
  • December 13 The government announces that the unemployment rate reaches near record high of 18%. Unions call nationwide strike.
  • December 14 Supermarket looting begins.
  • December 19 Rioting spreads to major cities over deep budget cuts. The government declares a state of siege. Minister of Economy Domingo Cavallo resigns.
  • December 20 President de la Rua resigns in the wake of continued rioting, leaving 28 people dead.
  • December 21 Congress accepts President de la Rua’s resignation. Senate President
  • Ramon Puerta is named provisional president for 48 hours.
  • December 23 Congress appoints San Luis Governor Adolfo Rodriguez Saa as interim president until elections can be held in March 2002.
  • December 26 The liquidity standards for banks are relaxed. Rodriguez Saa announces a new economic plan based on: 1) suspension of payments on public debt; 2) new jobs creation program; and 3) creation of new currency (the Argentino) to begin circulating in January 2002 and not to be convertible to the U.S. dollar.

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