November 2, 2011
Rumors of Drachma return grow
The talk of Greece going back to the drachma has been heard throughout the entire debacle of loans/debt crisis that started in 2009. But the possibility has never been more real than this week when Papandreou pushed for a referendum on austerity and a confidence vote for his government which is looking like the opt-in (or opt-out) vote for remaining in the EU. With so much seemingly in the air, drachma rebirth is looking more real (CNBC):
"So now it is time to ponder the once unthinkable: that Greece might end its 10-year use of the euro and return to its former currency, the drachma.
Such a move is still officially anathema in Athens. But a growing body of economists argues that it would be the best course, whatever the near-term financial and economic implications. And now, with a referendum on the European-led bailout facing Greek voters, a vocal minority that has long called for a return to the drachma might find itself with a growing group of listeners.
A return to the drachma is unlikely to offer a quick cure for Greece’s ills. Default on the nation’s $500 billion in public debt would become a certainty, depositors would take their money out of local banks and, with a sharp devaluation of as much as 50 percent, inflation would loom. A return to the international credit markets would take years.
But drachma defenders contend that these worst fears are overdone."
Further reading: Sydney Morning Herald "The Parthenon, as much a symbol of Greece as the drachma once was. "