By Paul Tugwell & Tom Stoukas
The imminent bailout of Greece, which is meant to keep the country in the euro zone, coincides with another historic date in the saga of Greek currency. On March 1 the Bank of Greece will stop exchanging drachma notes for euros.
The Bank of Greece, which has been responsible for collecting drachma notes and coins over the past 10 years -- coins had to be exchanged back in 2004 -- hasn’t been storing them for a just-in-case scenario. Rather, the central bank’s Printing Works Dept. cuts them into small pieces and has them compressed into recyclable blocks. It’s at least conceivable that some of the posters held up by angry Greeks protesting their government’s austerity plans started out as pieces of drachmas.
The March 1 deadline hasn’t exactly riveted the Greeks’ attention. “I wasn’t even aware of the deadline and don’t remember the date being widely publicized,” says Litsa Zafolia, 51, who closed her pet shop near Athens when sales plummeted once the crisis hit. Zafolia has held onto 2,000 drachmas -- worth about $7.73 -- for sentimental reasons. She has no plans to exchange them.
The modern drachma was Greece’s currency from 1833 to Feb. 28, 2002, when it stopped being legal tender. According to the Bank of Greece’s National Cash Changeover Plan, 700 million drachma notes had to be withdrawn from circulation and exchanged at the rate of 340.75 drachmas per euro. The Bank of Greece estimates drachma notes worth €200 million ($261.3 million) are still out there. Most are presumed lost or destroyed.
“Small numbers of people come to change modest amounts of drachmas on a daily basis,” says a teller, who asked not to be named, at the Bank of Greece’s central Athens office, an imposing neoclassical building that resembles New York’s Grand Central Terminal. No one was lining up with drachmas at the time.
Greeks were quick to embrace the euro when the currency became available in early 2002. “Entering the euro was the cherry on the cake of European Union membership,” says Andreas Maniatis, 56, an unemployed builder who changed all his drachmas early on. Today he sees the perils of staying in the euro and switching to a new drachma as pretty much equal. “The choice between new austerity measures with the euro and a default with the drachma is the same as choosing to be killed at five minutes to midnight or at midnight,” says Maniatis.
In a poll conducted for Greece’s Skai TV and Kathimerini newspaper in early February, 70 percent of those queried said a return to the drachma would make Greece’s situation worse, while 61 percent said they have a positive view of the euro.
If for some reason the current bailout arrangement collapses and Greece exits the euro, a new drachma will be a “real hell,” George Provopoulos, the current governor of the Bank of Greece, said in a Dec. 31 interview with Kathimerini.
The new currency would swiftly depreciate as much as 70 percent against the euro, Provopoulos told the newspaper. For a transitional period, before new drachmas could be printed and put into circulation, Greece would even have to resort to barter -- a kilo of olive oil, say, for three kilos of flour. That wasn’t the plan when Greece gave up the drachma a decade ago.
The bottom line: Although the Greeks have had years to swap their drachma notes, some €200 million worth of drachmas are still at large. [Bloomberg]