From drachma to euro: Big event or non-event?

In Greece, as in other countries with strong rural traditions, the fall is a season of gathering. After the harsh white light of the Mediterranean summer, October’s benign sunshine offers a few tantalizing weeks for collecting the grapes before the rains come, a timeless custom in the parched hills and terraced farms as vineyards offer up yet another harvest in this ancient land. Even in Attica, where the concrete tentacles of Greece’s capital seep ever further outward, the stony Greek soil defiantly yields its annual bounty of the sweetest of fruits. And the earthy rituals of a golden Greek autumn once again provide a healthy counterbalance to the upheavals of the modern world. Fall is a season of gatherings in another sense as well, with all manner of conferences and symposiums on the national agenda, such as the PASOK party conference late last week. Today another conference, a one-day affair by the Bank of Greece, deals with aspects of introducing the euro, and brings no less a figure to Greece than European Central Bank President Wim Duisenberg, another hardy perennial who recently showed admirable tenacity in insisting that he would serve out his eight-year term instead of being shoved aside after four. Like Greece’s patient grape growers, he’s here to share the EU’s latest policy harvest. In this case, though, the euro symposium marks not another autumnal rite but a genuine fall; that of the drachma, commonly described as the world’s oldest currency. Its coming phaseout (which is in fact already well under way) represents, for Greece and the other 11 euro adopters, an unprecedented legislating-away of old national currencies and submission to an outside authority, the ECB in Frankfurt, with power to set interest rates and regulate the supply of money. As an exercise in voluntary transfer of power, it remains almost unprecedented. However significant the change may be – described by the European commissioner for economic and monetary affairs, Pedro Solbes, as nothing less than the most important operation of changing currencies in world history – it seems almost lost in the shuffle as the world focuses on much more malignant threats to its status quo. Yet the encroachment of more pressing concerns since September 11 changes neither the fact of the coming changeover nor its timing; and it does not diminish the pivotal importance for Greece of its entry into Europe’s Economic and Monetary Union two years ago or, as of E-Day on January 1, its adoption of euro coins and notes to replace the drachmas that have, both in ancient times and again since 1833, served as the lubricating vehicle of the Greek economy. Like a relay race, the two currencies will run side by side in the passing lane for only a flicker of time (two months, January 1-March 1, 2002), as the tiring drachma chugs along in its last few meters before handing the baton over to the fresher euro. Will the change reinvigorate the Greek side in gearing up the pace of the long-heralded structural reforms, or will the baton be fumbled and an important opportunity squandered? The bottom of the iceberg Greece’s adoption of the physical euro will have major implications for a country that has traditionally relied more heavily on cash transactions than has most of Europe. Personal checks were never a common sight in Greece, and only over the past decade have Greeks taken to credit cards, sometimes with an enthusiasm bordering on reckless abandon. Yet cash remains, even today, the preferred means of exchange in, for example, supermarkets and stores, which implies that the actual, physical changeover will have at least as much immediate impact in Greece as elsewhere. And an awkward exchange parity (340.75 drachmas to the euro) will not exactly set people’s minds to rest as they pore over conversion charts to see what a chunk of feta will cost under the new regime. For Greece, adoption of the euro is also laden with symbolism and has already had significant political as well as economic impact. E-Day actually opens the third and last, not the first, stage in a decade-long EMU transitional process that dates back to the Maastricht Treaty initialed in December 1991. And Greece is alone among the EMU 12 in that gaining membership represented the crowning achievement of an entire government, that of Costas Simitis, between 1996 and 2000. It has also been the only EU country, so far anyway, in which the outcome of a national election has hinged on the issue. The April 2000 elections were even pulled forward (the parliamentary session was due to end in fall 2000) by the same PASOK government which claimed that EMU negotiations were at a critical stage prior to the setting of Greece’s terms of eurozone entry at the June 2000 EU summit at Porto, and must not be jeopardized by changing governments at such a sensitive juncture. It was quite a breathtaking electoral gambit, to use EMU as both cudgel and standard; claiming at once that the issue was still in the balance even while trumpeting its success. The EMU question has continued to resonate deeply in the national body politic, not least as a background to the government’s recent troubles. So much energy was expended on the EMU thrust that it has seemed tired and adrift since then, notwithstanding all the cheers at the recent party fest. In terms of international politics too, EMU has carried numerous implications. The single currency has been Greece’s primary vehicle, not just in entering the European mainstream but in pulling ahead of other countries that have hesitated to join. For the first time since its accession to the EEC 20 years ago, Greece is enjoying a comparatively good standing in Europe. It has slipped in ahead of three other, more reluctant EU members, and it is no less significant that those same countries, Denmark, Sweden and Britain, have long represented, for many Greeks, founts of progress and advancement, especially in education and social policy. The Athens, not London, bourse now prices its shares in euros. Such factors carry great significance for a country that just three years ago failed to qualify for EMU’s first wave. Doing it at street level But EMU’s broader significance means little when it comes to the physical changeover, and anecdotal evidence so far of preparations by Greek banks, firms and individuals is uneven, but reasonably reassuring. A recent EU report noted that Portugal and Finland, but not Greece, were lagging in terms of some practical arrangements for the euro (preparation of ATM bank machines). Greece’s efforts can not only boast a motivational and pride-based victory ahead of some Europeans, they have been given a practical, if preliminary, seal of approval as well. On the positive side, the demise of the drachma, which has perhaps more historical attachments than modern emotional ones in a country long associated with currency weakness and inflationary tendencies, is being taken, so far, anyway, very much in stride. For a country sometimes known for magnifying small issues out of all proportion, here is an example of just the opposite; of a major change seemingly reduced to a relatively minor adjustment. Perhaps this is only natural, given the Greeks’ pride in their adaptability, and it is likely that most will adjust fairly quickly and start thinking in terms of euros, especially younger and more active consumers. The elderly will have a significantly harder time of it. A catchy TV campaign was launched this week; even a countdown meter has appeared on the sidewalk in front of the Bank of Greece premises on Panepistimiou Street in downtown Athens. Even so, given the Greeks’ well-known propensity for waiting until the last minute to do things, there will no doubt be an adjustment scramble by smaller businesses and consumers in the new year, when flower-sellers, wine-shop owners, bakers and the like find themselves uncustomarily manning the front lines. Shop-owners, who for months have listed dual prices, may even be ahead of some banks. Just this week a colleague of mine, trying to make a deposit in euros, had a bank teller ask her what the drachma/euro conversion rate was, and minutes later witnessed an unloading of clearly marked mounds of euro bills onto the sidewalk in broad daylight, half-supervised by bored guards; even would-be criminals, it would seem, haven’t quite grasped the fact that the colorful euro notes will cease being play money soon. The authorities’ examples so far, such as denominating the recent national budget in euros, have a long way to go before they really sink in for the broader public. Nothing less than coins and bills in hand will do, and that will come soon enough as the deadline ticks down. The prevailing complacency is also, like elsewhere in Europe, mixed with unease that shop-owners will take advantage of a lack of consumer readiness to reap temporary profits by short-changing consumers in the changeover confusion. The extent to which this occurs will likely depend on the vigilance of EU and government fraud authorities. The euro may be Europe’s and Greece’s latest harvest, but for a while anyway, the sweet grapes will contain some hard and hidden seeds. And the fresh young wine it produces may taste a little bitter until, with time, it mellows into a genuine vintage. Heaven forbid it turns to vinegar.

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