MANY are still trying to find an answer to the crisis in Greece. Despite many fiscal measures the country is still on the brink, and the question remains, will the country return to the Drachma, and if so, at what cost?
A barrage of gloomy official statements and stories dominated
newspaper headlines on New Year’s Eve, seeking to exorcise the spectre
of Greece’s return to the drachma, although few offered solutions.
Prime Minister Lucas Papademos warned: “We must continue our effort
to avert a disorderly, catastrophic default and remain in the euro.”
The premier’s remarks were echoed by Bank of Greece governor Yiorgos
Provopoulos in a TV interview.
“A possible return to the drachma would be equivalent to real hell,
at least for the first few years outside the eurozone,” the country’s
leading banker told Skai TV.
The country sank deeper into an economic slump and missed all of
its fiscal adjustment targets in 2011, making the danger of a disorderly
default by March - when a 15bn euro bond is due for redemption - more
likely, unless at least 90 percent of private bondholders participate in
a voluntary writedown of Greek debt by 50 percent. The plan was agreed
at the EU summit on October 26/27 along with a second bailout plan.
But after two months of negotiations on the so-called private
sector involvement (PSI), no more than six out of ten eligible investors
have signalled their willingness to take the cost of the proposed
haircut in the nominal value of their bonds, according to the Wall
Street Journal.
Greece’s outgoing representative at the IMF, Panayiotis
Roumeliotis, said the country could not afford an unsuccessful outcome
in talks on the new bailout without risking a collapse of its aid
programme.
“If the new funding is not secured in time, anything can happen,
including a default, which could open the way for Greece’s exit from the
eurozone,” said Roumeliotis.
The spectre of returning to the drachma was also raised in a speech
on January 2 by Vasilis Rapanos, chairman of the Hellenic Bank
Association and president of the National Bank of Greece.
“We shall either stay in the euro if we all cut down on our
standard of living, or depart from the euro, turning the clock back
several decades,” Papanos said in his keynote speech during a New Year
celebration at the Athens Stock Exchange.
Rekindling the fear of an exit from the eurozone seems to touch a
popular chord, since opinion polls indicate support for the euro. In a
Kappa Research poll for To Vima published at New Year’s weekend, more
than 77 percent of Greeks want the coalition government to do all it
takes to ensure the country stays in the eurozone.
Government spokesman Pantelis Kapsis, a former editor of To Vima,
gave prominence to the euro-or-drachma alternative as key to national
policy: “This is indeed the dilemma ahead of us,” Kapsis told reporters
when asked about the avalanche of drachma scaremongering.
“There is no reason to cause panic by saying we will return to the
drachma. We can avoid it with serious and systematic work. But we should
not take it for granted that we have escaped the danger,” he added.
