Home' Trinidad and Tobago Guardian : July 9th 2015 Contents BG10 NEWS
BUSINESS GUARDIAN www.guardian.co.tt JULY 9 • 2015
In the Athens suburb of Holargos sits a printing
press that produced Greece s old currency, the drach-
ma, before the country joined the eurozone in 2001.
It was then, said freshly resigned finance minister
Yanis Varoufakis in a recent interview, that Greece
marked its acceptance into the European currency
union by smashing its printing presses---all but this
Now the facility, which prints 10-euro notes, has
returned to the public eye. Greek banks are running
short of money, having nearly expended emergency
funds from the European Central Bank. With backup
options drying up, the prospect of printing drachmas
has become real again.
If Greece and its creditors fail to come to accords
over its debt obligations in the coming days and
weeks, the country may find itself exiting the eurozone
and returning to some kind of sovereign currency.
Though it s impossible to predict exactly what that
would entail, economists say the transition would
involve a lot of pain.
But with innovative new money systems waiting
in the wings---such as the community currency used
in the town of Volos---some see glimmers of prom-
The Drachma returns
According to Eduardo Levy-Yeyati, Professor of
Economics at Universidad Di Tella in Buenos Aires,
Argentina, history provides little guidance for Greece.
"There are no relevant precedents," he wrote in an
Bank analysts saw Sunday s referendum---in which
Greek voters decisively rejected creditors demands
for further austerity---as a firm step toward a Grexit.
Last week, the head of the European Parliament,
Martin Schulz, said that Greece would be wise to
prepare an alternative currency if its citizens voted
the way they did.
Syriza, Greece s left-wing ruling party, has report-
edly drawn up emergency plans to revive the drachma
if negotiations with the eurozone fail.
A Greek exit from the euro, or Grexit, would be
far from simple. Facing a sudden dearth of legal
tender, the Greek government would likely have to
issue IOUs or exchangeable tax credits to keep the
gears of commerce turning. In the immediate term,
simply finding a way to print and distribute the de
facto currency would prove a major challenge.
Logistics aside, however, the moment the new
notes made it into the hands of residents in Crete
and Athens, their value would begin to decline. As
inflation took hold, the currency would immediately
lose buying power against the euro.
The result, according to Levy-Yeyati: would be
"deleterious immediate effects on economic activity
and income distribution."
If the government opted to nationalise the banks
and replace the "€" next to each deposit with a new
symbol, middle-class savers could see their nest eggs
collapse as the new currency nose-dives. Inflation
and capital flight could lead to mass layoffs and social
But devaluation could help Greece to a certain
extent. If Greece let its currency fall against the euro
and US dollar, it would effectively reduce outstanding
debts. Argentina did just this in the depths of its
economic crisis in 2002, when it dropped its unsus-
tainable 1-to-1 peg with the dollar and let the peso
plunge. In the years following---and after substantial
social upheaval---the country saw an economic ren-
But Levy-Yeyati, who has worked for the World
Bank and International Monetary Fund, cautions that
Argentina is no simple object lesson for the Greeks.
Greece has a weaker export economy and a debt-
to-GDP ratio three times greater than Argentina s in
2001, conditions that make a transition look
especially painful. "The facile Argentine
analogy of the Greek is misleading."
The Volos model
But the crisis could present new oppor-
tunities. From Bitcoin to barter, the impend-
ing loss of the euro has Greeks looking for
unorthodox solutions that operate largely
outside the banking system.
Leander Bindewald, a senior researcher
at the New Economics Foundation, draws
inspiration from the industrial Greek city
of Volos, which in 2011 established a barter-
like system of local alternative units---known
as TEMs in Greek. With euros in short sup-
ply, residents traded their skills---electrical
work, plumbing, teaching -- for TEMs,
which could be traded for, say, food from
a local grocer. Similar systems have sprung
up throughout Greece in recent years.
"These are a lifeboat for people in their
daily lives," says Bindewald, who manages
the international group Community Cur-
rencies in Action, which consults commu-
nities on setting up local monetary networks.
GREEK DEBT CRISIS
What currency will Greeks use if they leave the eurozone?
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