[Skip to Content]

Register to receive the OMFIF Daily Update and trial the OMFIF membership dashboard for a month.

* Required Fields

Member Area Login

Forgotten Password?

Forgotten password

Analysis
Why the drachma is history

Why the drachma is history

Only one problem with Grexit: the Greeks

by Denis MacShane

Wed 22 Jul 2015

A multitude of economic commentators, including many who wish Greece well, say that the only answer to the country’s problems is to give up the euro and return to the drachma.

It is almost irrelevant whether these pundits are eurosceptic or pro-EU, on the left or the right, Keynesian or neo-liberal. The line is the same, especially now that Wolfgang Schäuble, the German finance minister, has espoused an ‘orderly exit’ (an oxymoron if ever I saw one) from the euro.

Turning back the clock of history is a favourite parlour game. But there is a famous German, even more famous than Schäuble, who foreshadowed the Greek contradiction more than 60 years ago. This was playwright Bertolt Brecht, who wrote after the communist regime brutally suppressed an East German revolt in 1953, ‘Since the people cannot elect a new government, the government must elect a new people.’

That sums up the problem confronting these well-meaning economists. If they wish to implement their recipes, they will have to elect a new Greek nation. The number of people in Greece who want back the drachma is vanishingly small. The probability of the Greeks agreeing to return to their old currency is about as high as the Americans deciding to swap the dollar for the Mexican peso.

Greece could possibly be forced out of the euro by a majority of other countries. But I doubt that, in a democratic Europe, such a decision could be taken against a people’s will. Certainly it would be a national humiliation not experienced since the colonels took over in 1967

I spent three weeks in Greece in June and July during the recent upheavals. I travelled to islands, to mountains, to city suburbs and to Syntagma Square. I talked to Greeks of all persuasions. Professors, politicians, priests and pundits. Not one wanted to leave the euro.

During the week of Prime Minister Alexis Tsipras’ referendum, his party Syriza plastered every wall in Greece with posters saying ‘Yes to Europe. No to Austerity.’ It was an unusual poll. Voters could vote Yes and No at the same time. More than 60% voted against the creditors’ package. But this was a Yes to Europe.

That vote allowed Tsipras to perform his spectacular U-turn and agree most of the euro hardliners’ reform proposals. It led him to fire Yanis Varoufakis, his flamboyant British-trained finance minister, who (a very rare Greek) proposed issuing IOUs as a kind of Mickey Mouse parallel currency.

Varoufakis’ suggestion was in line with many economic commentators in Berlin, London and the US. But it led to his ousting. The quickest way to political suicide in Greece is to suggest giving up the euro.

I saw this first hand three years ago. I debated, for BBC World TV, the pros and cons of quitting the single currency with US economist Nouriel Roubini, in front of a large audience in Athens. A pre-debate vote showed 78% in favour of the euro. Roubini argued for a return to the drachma. He used identical arguments to those we read today. The pro-euro vote then rose to 80%.

Instead of telling the Greeks to follow a policy they don’t want, our distinguished economists should be more constructive. They should tell us what the International Monetary Fund, the European Union and the European Central Bank – as well as Greek citizens – need to do, with the euro in place, to enact the reform agenda rapidly and effectively. The drachma is part of history. That is where it will stay.

Denis MacShane is a member of the OMFIF Advisory Board and a former UK Minister of Europe.

Tell a friend View this page in PDF format