Greece’s Five Currency Options

ευρώ-και-δραχμήAt this crucial crossroads for the Greek economy and Greece, there are five currency options in case the country ends up leaving the common currency bloc, according to a CNBC analysis written by Kalyeena Makortoff.

Keep the euro 

Greece could unilaterally “adopt” the euro, even if it left the Eurozone. This is the currency countries like Monaco, Andorra, San Marino and Vatican City use their national currency, despite not being Eurozone member states.

The European Commission  allows these countries to issue limited amounts of euro coins, but they’re not allowed to print their own banknotes. Only the European Central Bank can authorize the issuing of euro banknotes. Greece must pay its debts to the ECB in order to qualify, but the decision is up to the ECB, according to Jane Foley of Radobank.

Develop a parallel currency

If the ECB stops providing Greek banks with emergency funding, the central bank could begin printing another currency without giving up the euro to meet its obligations such as welfare payments. The value of the new currency could likely fall rapidly against the euro, which could seriously impact Greeks’ spending power.

This inflation would give Greeks an incentive to prefer using the euro, entrenching a dual currency. It could effectively create a two-speed economy, with the euro dominating in sectors like tourism, Foley said.

Return to the drachma

Roger Bootle of Capital Economics said: “The key thing is that (Greece) has to redenominate deposits and debts into a new currency… which is the easy thing to do… The trickier thing to do is in terms of supplying notes — initially there won’t be any notes available.”

The government might issue IOUs in the interim. Stamps, for example, could be quickly printed in large volumes and used in place of bills, Bootle said.

However, adoption of any new currency — whether or not it’s the drachma — would result in further defaults, according to Foley.

A new currency would inevitably be weaker than the euro, increasing the weight of the country’s euro-denominated debt. “Greece needs to be able to issue their own currency and need the devaluation that comes with running your own currency,” Bootle said, adding that the transition would be difficult.

Pegged currency

Many countries regulate their currencies by linking them to the euro. Adopting a pegged currency, however, requires either a stable economy able to ward off speculative attack, or significant currency reserves.

Bulgaria, for example, had enough reserves to introduce a currency board. This means it is committed to converting its currency — the lev — for euros on demand. However, Greece is unlikely to drum up enough currency stockpiles to use this option.

Digital currency

There have been suggestions that Greece could adopt a digital currency like bitcoin, avoiding the messy practicalities of a new currency or paper IOUs.

However, Foley and Bootle say, this is very unlikely since the Greek economy heavily relies on cash and Greeks probably could not function without physical bills and coins.


  1. What an uneducated, dumb article. To create a valid currency, you must have something backing it. Bitcoin proved that when it crashed.

  2. Barter is an option in some rural regions in place of currency. In the past under the Drachma many businesses accepted hard currencies like the USD, UK Pound or German Mark and often gave very favorable exchange rates for these desired currencies. Very likely a hybrid of currency options will occur as resourceful Greeks find way to get around the problem until the Drachma-Economy is perceived to have stabilized. After a Grexit from the EZ there will be a period of 12-24 months of instability while we realign priorities and the nearly idle workforce shifts gears back to work. Once on our own currency standard will be competitive again and that is the end of the beginning for the EZ.

  3. I agree the ‘Drachma’ COULD bring more competitiveness to the Greek economy, but I do not agree this would be the end of the EZ. Greece is 1% of EZ’s GDP, would the dollar end if Alabama was to exit the $?

    Moreover, how on earth could Greeks accept the ‘Drachma’ (or whatever the new currency could be named), a national currency which is surely going to lose up to 50-60% of its value, when they do not accept 10-20% reductions in salaries to become more competitive?