Germans warns Greece: no cuts, no aid

[muriel_volestrangler]

158. Again, *had*.

That's gone now. They need to create a new one, and I don't think that's ever been done with an economy as advanced as Greece's is now. Sure, they can look up the old laws they had, and ways of running their own independent central bank, but that wasn't designed for a currency which they want to dramatically devalue against the euro. And there was no system for converting the country to the drachma. The drachma basically came in with independence from Turkey, when the economy was far different.

The old drachma was a stable currency when they converted. The new one will be unstable, and everyone in Greece, or dealing with Greece, will be looking for ways to not use it until the amount it's going to be devalued becomes clear. If the euro crashes too (rather as the Russian rouble crashed in the Soviet break-up), then it could make that part simpler, though that would mean an even worse devaluation against the dollar - and thus things like the price of oil. But in either case, it'll be far harder to arrange than joining the euro was.

There are no "contingency plans in case the euro did not work out". That's what the ECB was saying in the report. It says "a Member State’s exit from EMU, without a parallel withdrawal from the EU, would be legally inconceivable". That means they'd have to rewrite the EU treaties to do it in a controlled fashion - and EU treaty changes are next to impossible to negotiate, on much less weighty matters, let alone something as fundamental as this.

Or Greece could do it in an uncontrolled fashion - effectively cancelling the current government control of the economy, and trying to build a new one up from scratch, outside the EU.