Return to Drachma Would Be Catastrophic for Greece – Economists

Return to Drachma Would Be Catastrophic for Greece – Economists © AFP 2015/ PHILIPPE HUGUEN

18:43 26.05.2015(updated 18:59 26.05.2015) Get short URL
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Ditching the euro and returning to its national currency, the drachma, would be disastrous for Greece as it would destabilize the country’s banking system and wipe out people’s savings, European economy experts told Sputnik on Tuesday.

MOSCOW (Sputnik) — A new poll conducted by ICM Research exclusively for Sputnik revealed on Tuesday that 24 percent of Greek citizens would prefer to go back to using the drachma. Another 58 percent, however, say they would rather continue using the euro.

“The short- to medium-term consequences for Greece of returning to the drachma would be little short of disastrous. No one would want such a currency and a black market would ensue in Greece,” the head of the Hellenic Observatory at the London School of Economics and Political Science, Kevin Featherstone said.

According to Featherstone, such a move will make the Greek poor even poorer and result in the middle class losing “many” of its sources of income and savings. All of these would inevitably lead to social unrest.
“Expect police and army outside the banks as people scramble and panic,” Featherstone added.

Arsaell Valfells, professor of economics at the University of Iceland, shares the same stance regarding the prospects of going back to the drachma

“Such an action could destabilize further its [Greece’s] banking system and shut off its access to financial markets. The Greek public understands this,” Valfells said.

Meanwhile, Lave K. Broch, substitute member to the EU parliament for the People’s Movement against the European Union in Denmark, points out that for Greece there is no easy way out of the current economic situation — and thus a return to the drachma might be better for the country’s competitiveness in the long run.

“Staying in the euro will be a bigger problem for Greece as I see it. Greece needs to regain competitiveness and that is very difficult if the stay in the euro… There is light at the end of the tunnel if you have your own currency and it is much better seen from a democratic point of view,” Broch told Sputnik.

Greece was among the countries that were hardest hit by the global financial crisis of 2008-2009. Greece’s overall debt is currently estimated to be around $350 billion.

In recent months, the possibility of Greece’s exit from the European monetary union, with the return to the drachma, has been widely discussed both domestically and internationally.

In mid-April, however, EU foreign policy chief Federica Mogherini said such a scenario was not on the table.

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