Zapatero government collapsing; opposition may hold a vote of no confidence

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I know this will be sacrilegious to any EU officials, and I'm not advocating that the PIGS leave the Euro. But perhaps there should be a parallel, non-legal-tender currency in those countries to speed up the "internal devaluation" needed to bring back competitiveness. Think of the local currencies common in many college towns, except this one will be floating in value.

Perhaps Spain could create a "new" Peso, initially at a rate of 1 Peso = 1 Euro. At first, civil servants and those who receive public welfare will be partially paid in Pesos. A Peso/Euro exchange market will be created, and the Peso will be allowed to float (most likely devaluing). The supply of Pesos will boost the money supply across the country as a whole.

Businesses will quickly start posting prices in both Pesos and Euros, and as Spaniards get used to dealing in Pesos, their wage and price expectations will fall in real terms. The needed deflationary pressure is accomplished by creating a second currency which devalues just like a national currency. Throughout this time, taxes and government services are still paid in Euros, though the Peso/Euro market will be as liquid as any forex market. Once Spain has regained its competitiveness, the Peso will be abolished and converted to Euros at a cheap rate. The government will then be forced to use fiscal, rather than monetary, policy to cool down future asset bubbles.

Both tax revenues and spending will sharply fall in Euro terms, but because the Aggregate Demand is stimulated in real terms thanks to the devalued Peso, the budget might be brought up into black.