grexit, the mighty euro, and the indomitable drachma


Leonidas Petrakis

 First published in The National Herald (Εθνικός Κήρυξ), NY


Greece is in the sixth year of a financial crisis with Great Depression Era unemployment, a third bailout package just negotiated increasing its ever-mounting and unsustainable debt, and still uncertain prospects for escaping from its current painful and humiliating situation. Grexit (Greece exiting the Eurozone, forcibly or voluntarily) has become the focal point of a national soul searching and of an international debate as to whether extrication from its economic morass is best accomplished (or even if it is possible) within the Eurozone or with the country returning to its national currency. 

Despairing of the devastation that extreme nationalism had visited upon Europe during two wars, there were steps taken at the conclusion of WWII by visionaries for a European economic and political union that would eventually lead to the creation of a superpower, The United States of Europe. The modest beginnings of that vision (a coal and steel community in 1951) culminated with the Maastricht Treaty of 1992 that codified the establishment of the European Union (EU). The Treaty also obliged its members to adopt the single currency, the euro, once they met strict monetary and budgetary criteria. Entry into the prestigious Eurozone was to be in perpetuity; it was also touted that it would make continuing economic development feasible even for economies such as that of Greece, while at the same time enabling the modernization of its public institutions (tax collection, efficient public sector, etc).

In addition to this expectation for economic growth and state modernization there was much pride among the Greeks for the new transnational currency as "euro" in Greek letters would appear on the coins and notes that were to circulate in all the Eurozone countries. There was also pride for the euro sign itself -the epsilon (for the initial vowel of Europe) with «two parallel lines to certify the stability of the euro», as the European Commission proudly pointed out. (The euro would remain stable as parallel lines do, since they never cross in Euclidean space.) But the stability has been mostly symbolic. In reality the euro during its existence has fluctuated wildly relative to the dollar, not to mention the existential fears that Grexit has brought about. Greece's economy is a small component of the Eurozone, but Grexit would establish a precedent and demonstrate that the Eurozone was not forever. 

There have been serious challenges to the single currency concept from its very beginning. Margaret Thatcher, England's "Iron Lady", was dismissive of the euro and predicted its ultimate failure; the UK and Denmark have negotiated special exemptions for their association with the Eurozone; Sweden opted out of the euro by a referendum; Iceland withdrew this year its application for membership; currently only nineteen of the twenty eight members of the EU are in the Eurozone; once fervent euro-aspiring Poland and other Eastern European nations are backing off from their eagerness to join lest they become "another Greece"; and Euroskeptics seem in ascendancy in various countries.

Greece initially did not qualify for entry into the Eurozone, but an elaborate and expensive scheme enabled its entry in January 2002. Goldman Sachs devised a scheme that allowed Greece to mask its deficits, circumvent the Maastricht deficit rules, and thereby qualify for membership. For their helpfulness and expertise in creative accounting Goldman Sachs received a hefty commission from the Greek Government. 

The transition from the drachma to the euro was mostly uneventful, and there were even humorous incidents reported (small shop keepers refusing «ta kokkina», i.e., the small denomination copper coins). And a distinguished professor of classics was heard to ruefully lament that «this day (of the passing of the drachma) is very sad for some of us».

The drachma as a monetary unit has a very long history, from the Archaic to the classical and Hellenistic periods. After the conquest of Greece in 146 BC by the Romans, the drachma was officially replaced by the denarius, but under the Roman policy of provincial currencies it continued being minted in many localities, especially in Alexandria and in Corinth, well into the Common Era. In the Gospel of Luke there is the parable of the lost and found drachma.

The word drachma derives from the verb "δράττoμαι", meaning to "grasp a handful." In its initial monetary use, it referred to six metal rods («obols» or «spits») that were grasped, and that handful was a drachma. 

The Numismatic Museum in Athens has a very rich display of drachmas of different denominations issued by various city states. Issuing cities included Athens (Peisistratos didrachm),Aegina (Chelone ca 700), Massalia (Marseilles tetrobol), Olympia (tetradrachm,105th Olympiad), and many others. The two most famous were the 5th century B.C. Athenian just over four gram silver «tetradrachm», and the drachma of Alexander the Great. Both became international means of payment and commerce throughout the Mediterranean basin and the remotest reaches of Alexander's conquests. The drachma gave its name to other currencies, including the Arabic dirham (the name of the currency of several Arab countries) and the Armenian dram. 

After a long hiatus the drachma was reintroduced as national currency in 1832 following Greece's independence from the Ottoman Empire. By 1893, Greece faced bankruptcy due to over-borrowing and over-spending. During the Nazi occupation new drachmas were issued that underwent unprecedented hyperinflation. The post-WWII drachma also suffered from high inflation, and the then Minister of Finance Spyros Markezines in dealing with the inflation famously chopped off three zeroes from the value of the drachma. 

The value of the drachma has undergone wild gyrations over its very long history. Thucydides in The Peloponnesian War states that one drachma was the daily wage of a hoplite, and Aristophanes in The Wasps mentions three obols (half a drachma) as the wage of a skilled worker or serviceman. During the German Occupation this writer remembers worthless drachma notes denominated in hundreds of millions. In 1954, thirty drachmas bought one U.S. dollar. When Greece joined the Eurozone in 2002, the drachma was exchanged at the rate of 340 drachmas to one euro. Devaluation and hyperinflation are key topics in the current Grexit debate. 

In contrast to the smooth and celebratory transition from the drachma to the euro, the possibility of a Grexit has rocked the financial world markets, and has become a deeply polarizing issue in Greek society. The often rancorous euro vs drachma debate (dominated by the cacophonous banality in the Greek mass media) is being carried out in the shadow of the six-year long grinding and deepening economic quagmire. Thirteeen years into the Eurozone the initial expectations of robust economic growth and modernization of the state (tax collection, effective public sector) remain unrealized, despite the country assuming such a staggering debt.

Will the newly negotiated third bailout accomplish what the previous borrowings failed to do? Will there be another drachma resurrection? Strong assertions abound on all sides, and experts maintain again that «this time will be different». However, what remains certain and accepted by all is that the proud and long-suffering Greek people face an uncertain and very difficult road ahead.


  ΧΡΟΝΟΣ 29 (09.2015)