Is the “Euro-Drachma” a solution for the Greek crisis? No, not, a coin featuring Euro on one side and Drachma on the other side, as an internet user posted in a Greek economic forum. But the Euro-Drachma would be the currency to be used for the internal trade within Greece, and the EU-Euro to be used for the external trade. This brilliant idea came from Giorgos Karatzaferis, the leader of the 15-MPs-strong far-right party LAOS.
Speaking to a Greek television network, Karatzaferis elaborated his concept of the Euro-Drachma as one of the measures included in his party program to address the crisis. “Greece should do it like Germany did it in 1923” he said.
“Official domestic currency should be the euro, but for internal trade the Euro-Drachma should be used and thus for a period of two years. The Euro-Drachma will be used only in Greece, and the official currency Euro for our external relations with foreign countries. We will get Euro from the tourism industry, from import taxes and at the same time we will have the Euro-drachma. As the Americans did with the Dollar (????) and they were saved. In two years the values will be exchanged to euros.”
The Euro-Drachma will discourage the money to be transferred abroad” he said and added “In this way the illegal immigrant who will get paid in Euro-drachma will not be able to transfer the 12 billion abroad. Lidl and Carefour, that every Friday collect all the money from the Greeks, will not transfer their earnings it abroad because the money will have no any value abroad.
According to Karatzaferis, in this way the local markets will revive, wealth will be produced, taxes will flow, development will grow and the country will manage to survive economically.
I didn’t see the TV broadcast, I don’t know the journalist’s questions. Most probably he was so stunned and speechless and so damn unable to put any question on the table. I wasn’t even surprised to read in a well known economic Greek forum that 100% of the commentators were making jokes of this idea. many even accused of of “extreme populism”.
My first question is, of course, why should LIDL and Carefour invest in a no-value market. My second is whether the European Central Bank would allow this – It won’t!
According to Karatzaferis vision, employees will be paid in Euro-Drachma, pay their purchases in Euro-Drachma and travel abroad in Euro. Merchants will have huge gains in the local currency as well and be happy to enjoy a huge wealth in a North-Korea like isloated society. The citizens, like modern European Kubans, will swim in seas full Euro-drachma. They will mock at Merkel and Trichet and the next Chief of IMF. Or not? Because I have the slight suspicion that the imported goods will be sold in exorbitant prices. As Greece imports the majority of the good needed, I dare assume that the country would soon have no money to pay for its imports.
How about earnings from the export?
Greece has no production line, exports are minimal. (currently the country exports ‘human labour’ but that’s not profitable). With this devalued Euro-Drachma and a concept of strict economic isolation investments will stay away. In this simple-minded Euro-Drachma concept 11 million Greeks will have to live from tourism. I can start renting part of my flat (just 3 km away from the sea, parking plot incl.) at wealthy Europeans and American, charge 500 Euro-Drachmas per night and at the end of the week, with my freshly earned money go buy a kilo of potatoes and a bread loaf. Of course, I can ask the travellers to pay me in goods. Chocolates, aspirin, coffee, tea, milk powder, detergents, only to mention a few. I can sell them and be a black-marketer… like those of the kind flurishing in economically broke societies and countries.
I dare not think about how Greece will manage to pat back its debt.
I can kiss my belly button right away or start soon a black-marketer career?…
Of course, there are serious economic concepts developed by respected academics and economists. A friend sent me a link to a Financial Times article with the Title “The Californian solution for the Club Med“. There, it is said that Greece (and Portugal ) cannot leave the eurozone because this would trigger an immediate banking crisis. Furthermore and on the example of Portugal the two professors develop their model of a Dual Currency Mechanism and explain how this system would work in reality. They conclude though:
“It would be messy, and an unattractive dual currency mechanism. But it could work; it has done so before now in other countries and circumstances. It would protect the German banking system, safeguard the basic existence of the euro, and, for the eurozone countries in danger of default, it might be the least bad option”.
But why should we bother with a dual currency? Just to save the Euro and the German banking system?
PS. I am daily shocked by my own humble <me>. I realize at every occasion that I, an EU-supporter since my youngest years, slowly mutate into a EU-sceptict.
Here is the Financial Times Article: