The Return of the Drachma?
Posted by Allison on 30 June 2015, 10:03
The thought that the drachma may return is one some predicted a long time ago and others could never envisage. However we are now at the point where something has to give. Will the EU bend to the will of Greece or will Greece exit the euro and regain the drachma as a result?
The Grexit, as it has become known, is now looming larger than ever. Many think it would be best if Greece did leave and re-introduced the drachma as a result. No one knows what would happen in this situation, but perhaps there is a bigger question here than that of a potential Grexit.
The question is this: Would the euro tumble and fall if Greece left the Eurozone?
Again, no one knows. But many commentators point out that a single currency has been tried several times over throughout history. Not once has it worked. We can see here that it is not working either. Indeed, the Eurozone had strict rules for countries to enter the zone and adopt the euro. Those rules were bent in order to let Greece in. The chickens, as the saying goes, are now coming home to roost in a big way. If Greece went broke and left the euro, it would prove that giving up a currency and adopting the euro was not, after all, a finite thing. It was said at the launch of the euro that once a country adopted it that would be it. There was no way a country could revert to using its original currency again.
Perhaps we are about to find out whether that is the case. Whatever happens the outcome will not be a good one. Even if Greece does stay in the euro it will be at the expense of the rules and regulations laid down by those in charge in the EU. Something has to give – at present though, we do not know which side will give and what the outcome will be.
Some think if the Greeks did leave the euro and got their drachma back it might lead to other countries leaving the Eurozone as well. Could this happen? Would there be a chance for the entire Eurozone to come tumbling down like the proverbial house of cards? A lot would depend on where Greece is situated in that house of cards. If it turns out to be near the top the damage will be limited. However if it is closer to the bottom it could be catastrophic for all concerned.
No answers are yet available in this situation. We suspect that even after the end of June deadline associated with the Greece-Eurozone stand-off, we may still not know the answer. This may rumble on for months yet.