Currencies Direct: drachma reintroduction would take months of planning

When it comes to tackling Greece’s economic future, euro-zone
members remain worryingly polarised. While Angela Merkel holds on
to the belief that tough austerity can steer any troubled state
from the threat of default, there are many European leaders who are
simply fed up with Greek fecklessness: calling for the country to
leave the euro once and for all, and re-adopt the drachma
currency.

Yet if Greece was to leave, currency exchange
experts, Currencies Direct, says the transition from euro to
drachma wouldn’t be as swift as leaders predict. They say
re-introducing the drachma would take several months of careful
planning to fully implement; citing the need for the Greek
government to firstly design, print and then distribute the
currency before ‘officially’ leaving the euro-zone.

There are other problems too: the government would need to clear
many practical and legal hurdles before distribution could
begin.

One obstacle involves timing. Any whiff of a Greek exit and
panic is likely to spread fast, prompting mass bank runs across the
whole country. Of course it would be hard to keep such news a
secret, especially when European leaders convene, but if ‘Grexit’
was confirmed then the Greek government could immediately impose an
extended bank holiday, allowing enough time to place the drachma in
circulation while markets were closed.

If Greece does leave the euro and re-adopt the drachma, the new
currency is sure to devalue the instant it begins trading on foreign exchange
markets. This may not necessarily be a bad thing. Currencies Direct
says that devaluation could kick-start lost competitiveness and
therefore avoid the need for the government to grind down costs
over several years- which is part of their bailout agreement.

Legality is another issue.

According to legal opinion published by the European Central
Bank in 2009, because European treaties did not conceive the
possibility of a country leaving the euro, an exit is technically
illegal. This of course favours those lobbying for Greece’s
continued stay in the euro-zone. But if the Greek government agrees
to leave, this odd technicality could delay the drachma’s return;
leaving the country, potentially, devoid of cash.