Monday, February 27, 2012

The Bank of Greece Is Rich - In Irony

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Via Paul Tugwell & Tom Stoukas of Bloomberg from "The imminent bailout of Greece, which is meant to keep the country in the euro zone, coincides with another historic date in the saga of Greek currency. On March 1 the Bank of Greece will stop exchanging drachma notes for euros. The Bank of Greece has been responsible for collecting drachmas since 2004. The modern drachma was Greece’s currency from 1833 to Feb. 28, 2002, when it stopped being legal tender. The Bank of Greece estimates drachma notes worth €200 million ($261.3 million) are still out there. Greeks were quick to embrace the euro when the currency became available in early 2002. “Entering the euro was the cherry on the cake of European Union membership,” says Andreas Maniatis, 56, an unemployed builder who changed all his drachmas early on. Today he sees the perils of staying in the euro and switching to a new drachma as pretty much equal. “The choice between new austerity measures with the euro and a default with the drachma is the same as choosing to be killed at five minutes to midnight or at midnight,” says Maniatis. If for some reason the current bailout arrangement collapses and Greece exits the euro, a new drachma will be a “real hell,” George Provopoulos, the current governor of the Bank of Greece, said. The new currency would swiftly depreciate as much as 70 percent against the euro. For a transitional period, before new drachmas could be printed and put into circulation, Greece would even have to resort to barter. That wasn’t the plan when Greece gave up the drachma a decade ago."