If they work anything like American banks, Greek banks have reserves - euro notes and accounts at the ECB; assets - loans outstanding, denominated in euros; and liabilities in the form of deposits. They could change the denomination of the assets and liabilities easily enough: run “find and replace” and change the word euro to drachma wherever it appears. They could exchange bank-owned euros for newly printed Greek currency. (The government would wind up with a pile of euro notes. What would it do with them? They’re still liabilities on the ECB, so I guess they could spend them.)
But what about reserve accounts? Those are under the control of the ECB. But they could be transferred to a new, Greek, central bank, and recorded at the GCB as credits to Greek commercial banks, as drachmas rather than euros.
There would still be millions of euro notes in Greece. But they would simply be foreign currency. Greek vendors would be subject to legal tender requirements, and would need to post prices in drachmas. But that’s no different from the rules in any country.
Then there’s debts to foreigners. The Greek government would unilaterally change its debts from euros to drachmas, at 1:1 (or at whatever predetermined rate). They could, if they wanted, do the same thing for private debtors. All those furriners wouldn’t like it, but what could they do?
They’d want to announce the plan and carry it out simultaneously. If word leaked out, there’d be a run on the banks. People would hoard euros. Spending would stop. The market rate for drachmas would fall. There’d be inflation. Imports would become prohibitively expensive. You’d see an increase in exports, tourism, and employment.
First of all, you talked about Euro notes, but that has to be such a small amount as to be irrelevant.
However, most of what you wrote here would happen whether or not word leaked out, and it is sort of the plan. Spending would not stop–people would spend drachmas like crazy. They would hoard Euros. The value of the drachma would plummet. Imports would fall; real wages would fall. Tourism and exports would become cheap for (other) Europeans.
Hopefully, that would lead to increased employment. How it leads to people paying their taxes is left as an exercise for the next Greek government.
Not all Euros are the same. Each country has their own, denoted by the first letter of the serial number. If a country were to leave the Eurozone, then their Euros would no longer be accepted inside the Eurozone.
There is approximately $1T in circulation in Euros. Not a small amount.
Are you sure? So, if I sold stuff to Greeks and they paid me in Euros and I held those in banknotes rather than depositing them, they’d now be trash? I’m skeptical.
With 10M Greeks and 500M EEC members, that’s about 20B Euros in Greece. Probably less, even with banknote hoarding, simply because Greeks are having a hard time making ends meet. Still, it’s nothing to sneeze at, and more than I would have guessed.
I seriously doubt. I’ve spent a good deal of time in various european countries, and no matter what country I’m in I’ve received Euros from all over Europe as change, from banks etc… The point of the Euro is although each country issues their own, they are interchangeable throughout the Union.
Any Greek withdraw is going to affect bank holdings, but it can’t affect the cash. Ergo, runs on the banks etc… as Greeks desperately try to get Euros to hoard. Likely it’ll be illegal to spend Euros in Greece, leading to a (more) black market Euro economy.
They could do that obviously, but it would be a default. Greece has borrowed Euros, and would still owe Euros, not Drachmas, Yens or Cauris even if it abandonned it as its currency.
Why? Greece would still be part of the EU and of the Schengen area. Whether or not it’s using the Euro is irrelevant. It would just be in the same situation as, say, Denmark.
Nope. Euros are Euros regardless of where they have been printed.
They are now, but if Greece were to leave, those Greek Euros would no longer be accepted by prudent businesspeople. My search-fu is lacking, but I have read many times of people checking the nationality of euro notes and preferring German and French ones.
I just had to check my wallet. Only 3 notes (I generally use my bank card), each has a different letter in the serial number. In this case X, Y and H. Are you saying that the Austrian Banks, from which I got them, are going to look any harder at notes with a G serial number?
Only the coins (and only the higher denomination ones at that, IIRC) are readily distinguishable by nation.
clairobscur has it right- a Euro’s a Euro, regardless of where it’s printed, and they’re in circulation all over Europe. I’ve had French Euro coins in Italy, Austrian ones in Belgium, Belgian ones in France, etc… I’m sure the bills were the same, except that I never looked at serial numbers.
Even if they somehow magically forbade Greek Euros (whatever they are) from being circulated, I’d bet that a very large percentage of Euro bills and coins in Greece aren’t even Greek Euros in the first place, and those would surely be hoarded.
Well, it’s not just their choice of currency - it’s the instability of the transition. Will there be a massive capital flight, for example, people converting their perceived-soon-to-be-worthless Greek Euros into gold or other valuables and getting it the heck outta Greece? In general terms, people trying hard to get their wealth out of the country before the country collapses, which has the effect of aggravating and accelerating that collapse.
Yes. That’s the point–Greece can’t pay its debts so it defaults on them. It can’t pay its pensions so it cuts them. It can’t pay its civil service wages to it lowers them.
There is logically no difference between inflating the currency by 50% and keeping a hard currency but giving debtors, pensioners, and public wage earners a 50% cut, but the former is the path that was closed to Greece when it joined the Eurozone, and the latter is regarded as politically impossible. If Greece leaves the Eurozone it is because it is choosing an inflationary default over a direct default.
This is simply not true. Did you read the wiki article to which I linked? Notes have easily distinguishable serial numbers. Here’s a link to the European Central Bank which also explains it (scroll down a bit). I have a 10 Euro note in front of me. The serial number is clear and starts with an X, which means it’s a German one.
You are not correct, there is no basis in european law to say a bill that happened to be printed in the Greece is greek in the sense you have invented. this is only a printing function.
It is only euros in bank acccounts under greek control that can be concerned.