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Greece Denies Secret Exit Plan
By Richard Giedroyc
World Coin News
August 16, 2010
Greece’s credit rating plunges, its labor force continues to protest its government’s attempts at austerity. Other member nations in the European Union continue to hesitate to throw good money after bad to bail out Greece. Rumors have begun to spread regarding if the beleaguered nation might opt out of the EU currency union.
The Greek government, of course, has argued there is no secret exit strategy, and that no matter what happens Greece will continue to participate in the eurozone. The latest rumors of Greece possibly preparing for the worst appear to be a belated reaction to The Lisbon Treaty, an agreement that went into force in December 2009 that grants EU member nations the right to withdraw from the union. Should a nation withdraw from the currency union it must also withdraw from the EU entirely.
Rumors regarding Greece leaving the EU voluntarily or involuntarily reached such an intensity recently that Greek Finance Minister Giorgos Papakonstantinou invited a television crew inside the high security areas of the national mint just to prove the coinage machines were striking euros rather than drachma.
There is no web site for the Greek mint, the mint being listed under the Bank of Greece with an Athens address. The only substantial comment at the web site regarding coinage was: “The period during which the Bank of Greece and tax authorities exchanged drachma coins for euro expired on 1 March 2004.” The current situation was not addressed.
The June 16 issue of the German newspaper Deutsche Welle reported, “Recent weeks have given rise to rumors that Athens has already started preparing for its exit by covertly printing drachma bank notes and coins.”
The newspaper was also quick to quote Papakonstantinou’s response to the rumor – “laughable.” Perhaps the finance minister was trying to appear arrogant on purpose, but his point is well taken. Is it really practical for Greece to return to its pre-euro drachma coins and bank notes or not?
Cologne Institute for Economic Research Director Michael Huether told Deutsche Welle, “What would such a deal look like? It would need to be negotiated.” In Huether’s opinion a switch from the euro to a domestic currency would only work if the nation leaving the currency union was going to devalue its currency once a new domestic currency system was in place.
Huether added, “It (a currency devaluation) would trigger a massive reaction among private investors. There’d be a run on the banks as everyone tries to have their euro-denominated accounts paid out in cash.”
He continued, “In the case of Greece, 95 percent of public debt would still be denominated in euros, and that would still need servicing. The situation would lead to an enormous rise in the price of imports, especially raw materials.” This, Huether said, would be “unmanageable.”
Regarding the option provided by The Lisbon Treaty the German newspaper said, “Theoretically, a eurozone nation could shed its eurozone membership by dropping out of the European Union and rejoining straight away.”
The question needing to be addressed if such a scenario ever took place regards if the other EU members were to refuse to allow that nation re-entry. From a numismatic view there are serious logistics involved as well. Should a nation drop out of the EU and its currency union there has to be some form of currency other than the euro physically in place to be used in commerce, even if that interim period might be brief. Using some imagination, just think of the low mintage coins that might become available resulting from such a financial roller coaster ride!
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Il parere dei numismatici ...
By Richard Giedroyc
World Coin News
August 16, 2010
Greece’s credit rating plunges, its labor force continues to protest its government’s attempts at austerity. Other member nations in the European Union continue to hesitate to throw good money after bad to bail out Greece. Rumors have begun to spread regarding if the beleaguered nation might opt out of the EU currency union.
The Greek government, of course, has argued there is no secret exit strategy, and that no matter what happens Greece will continue to participate in the eurozone. The latest rumors of Greece possibly preparing for the worst appear to be a belated reaction to The Lisbon Treaty, an agreement that went into force in December 2009 that grants EU member nations the right to withdraw from the union. Should a nation withdraw from the currency union it must also withdraw from the EU entirely.
Rumors regarding Greece leaving the EU voluntarily or involuntarily reached such an intensity recently that Greek Finance Minister Giorgos Papakonstantinou invited a television crew inside the high security areas of the national mint just to prove the coinage machines were striking euros rather than drachma.
There is no web site for the Greek mint, the mint being listed under the Bank of Greece with an Athens address. The only substantial comment at the web site regarding coinage was: “The period during which the Bank of Greece and tax authorities exchanged drachma coins for euro expired on 1 March 2004.” The current situation was not addressed.
The June 16 issue of the German newspaper Deutsche Welle reported, “Recent weeks have given rise to rumors that Athens has already started preparing for its exit by covertly printing drachma bank notes and coins.”
The newspaper was also quick to quote Papakonstantinou’s response to the rumor – “laughable.” Perhaps the finance minister was trying to appear arrogant on purpose, but his point is well taken. Is it really practical for Greece to return to its pre-euro drachma coins and bank notes or not?
Cologne Institute for Economic Research Director Michael Huether told Deutsche Welle, “What would such a deal look like? It would need to be negotiated.” In Huether’s opinion a switch from the euro to a domestic currency would only work if the nation leaving the currency union was going to devalue its currency once a new domestic currency system was in place.
Huether added, “It (a currency devaluation) would trigger a massive reaction among private investors. There’d be a run on the banks as everyone tries to have their euro-denominated accounts paid out in cash.”
He continued, “In the case of Greece, 95 percent of public debt would still be denominated in euros, and that would still need servicing. The situation would lead to an enormous rise in the price of imports, especially raw materials.” This, Huether said, would be “unmanageable.”
Regarding the option provided by The Lisbon Treaty the German newspaper said, “Theoretically, a eurozone nation could shed its eurozone membership by dropping out of the European Union and rejoining straight away.”
The question needing to be addressed if such a scenario ever took place regards if the other EU members were to refuse to allow that nation re-entry. From a numismatic view there are serious logistics involved as well. Should a nation drop out of the EU and its currency union there has to be some form of currency other than the euro physically in place to be used in commerce, even if that interim period might be brief. Using some imagination, just think of the low mintage coins that might become available resulting from such a financial roller coaster ride!
***
Il parere dei numismatici ...
