Tags: Drachma | Greek | Crisis

NY Times: Return to Drachma Rumored in Greek Crisis

By    |   Thursday, 03 Nov 2011 08:06 AM

More Greeks want to leave the euro after 10 years and return to the drachma, its former currency, The New York Times reports.

Greece remains mired in a long and deep recession and is suffering even more due to austere reductions in public spending. The country is practically at the point of rebellion and Prime Minister George Papandreou's government is hanging by a political thread.

Euro supporters say leaving the common currency would bring financial Armageddon, but more and more Greeks think their failed economy is already apocalyptic enough, the Times reports.
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Although drachma supporters agree that dropping the euro would mean high inflation and financial disruption, they say major problems would be short lived. By regaining control over its currency, the country could erase its debts and start over and increase exports by devaluing its new currency. They point to Argentina, which broke its link to the dollar in 2002, then enjoyed a boom in exports.

"The real problem is that we are operating under a foreign currency,” Vasilis Serafeimakis, an executive at Avinoil, a Greek oil and gas distribution company, told the Times. "If we had our own currency, we could at least print money."

A recent poll by a Greek newspaper indicated that 66 percent of Greeks are against leaving the euro. But drachma advocates say more Greeks are questioning the wisdom of keeping the common currency.

"The view that Greece should exit the euro is more widespread than you would think," said Costas Lapavitsas, a Greek economist at the University of London. "It is just that the opposing view is so dominant."

Greece's main problem is not debt, unemployment or a mismanaged public sector but lack of international competitive caused by adoption of the euro, drachma advocates say.

"A Greek hotel room is two times as expensive as one in Turkey,” said Greek economist Theodore Katsanevas in the Times article. "We are almost dead now — what we need is a resurrection."

Some economists and business experts outside Greece have also argued that the country cannot recover while still with the euro.

Countries like Britain, Japan and the United States carry large debts and deficits but can borrow at low interest rates, argued economist Paul Krugman in his column in The New York Times. That's largely because they have their own currencies and investors know they can simply print more money if they get into trouble.

"Furthermore," he writes, "Europe actually needs modestly higher overall inflation: too low an overall inflation rate would condemn southern Europe to years of grinding deflation, virtually guaranteeing both continued high unemployment and a string of defaults."

Papandreou shocked eurozone leaders by calling for a referendum on austerity measures needed for the recent rescue agreement. The referendum will essentially be on remaining in the eurozone and keeping the common currency.

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More Greeks want to leave the euro after 10 years and return to the drachma, its former currency, The New York Times reports. Greece remains mired in a long and deep recession and is suffering even more due to austere reductions in public spending. The country is...
Drachma,Greek,Crisis
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2011-06-03
Thursday, 03 Nov 2011 08:06 AM
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