Why Greeks Still Want to Keep the Euro, in One Chart

As of midnight European time, Greece has become the first developed country in history to fall into arrears on payments to the IMF. It’s not that much money, by today’s standards: €1.6 billion. But for Greece, which is totally out of money, it’s an unreachable amount. The last time a country did such a thing was in 2001: Zimbabwe.

However the IMF ends up calling it in its institutional mumbo-jumbo, Greece has now defaulted on part of its debt. No one knows what’s going to happen next. Another emergency meeting is planned for Wednesday, so maybe….

Greeks have seen this coming months ago. So they yanked their money out of Greek banks with increasing determination, while they still could, starting last year. They have every reason in the world not to trust their banks. The withdrawals morphed into a “jog on the banks” last week.

When the central-bank spigot that had funded these withdrawals was turned off over the weekend, it brought the banks to their knees. The government, afraid of what would happen next, closed the banks for six working days. But re-opening the banks on day seven is going to be tough, unless new funding arrives in the interim. And Greeks now can’t get their money out, except in small amounts at the ATMs.

Whatever money they have left in the banks is now largely stuck there. All they can do is hope that they’ll get it back someday, in euros, not in drachmas, and not in form of equity in the banks.

But despite the deprivations, they still trust the euro and want to keep it. In the latest poll, done over the weekend during perhaps the greatest financial chaos Greece has seen in recent years, 57% of the respondents wanted to keep the euro and wanted their government to make a deal with the creditors; only 29% wanted a rupture from the Eurozone.

When it comes to money, the Greeks learned a lot of lessons the hard way over many generations. The drachma has always been seen by them as a way for the series of corrupt governments to steal from the people through devaluations and inflation.

From 1981 through January 1, 2001, when Greece adopted the euro, the drachma lost most of its value against the euro and its predecessor, the ECU (European Currency Unit) which was instituted in 1979 along with the Exchange Rate Mechanism and the European Monetary System.

Over these two decades, the drachma plunged from 62 drachmas per euro (1 drachma = 0.0163 cents) at the high point in 1981, to 340 drachmas per euro (1 drachma = 0.00294 cents) on January 1, 2001. An 82% loss in value against the euro in 20 years.

That loss in value included two devaluations.

On October 13, 1985, a Friday night, Prime Minister Andreas Papandreou devalued the drachma by 15%. It came along with some austerity measures to get the deficits and money-printing under control. Inflation was raging at 24% annually. The drachma’s value was going up in smoke in a hurry.

Then on March 14, 1998 – rinse and repeat – the drachma was devalued by 14%. By that time, inflation was down to 5%. As Greece was preparing to accede to the Eurozone, inflation would have to be brought to 2.5% or lower.

At first, the euro was working for the Greeks. The international bond markets, so mostly banks, made nearly unlimited cheap euros available that the government borrowed in dizzying quantifies and handed out liberally. Some of it disappeared through the usual channels to line the pockets of well-connected individuals and companies. Salaries, pensions, and standards of living soared – while they languished in Germany and elsewhere. A lot of Greeks became wealthy. And everyone was happy during those years of folly that culminated with the Olympics.

What Greeks are struggling with now is how to deal with the terrible hangover. But despite the hangover and all the difficulties, and despite whatever “fundamental flaws” the euro might have, Greeks don’t want to leave the euro behind. And they have their reasons….

This is what monetary theft looks like from the Greek point of view, and why they don’t trust their politicians and central bankers in managing a currency. They’ve learned the hard way and won’t forget the drachma’s 82% devaluation against the euro in two decades. But now push has come to shove. And along with the Greeks, the “smart money” too has been left to twist in the wind. Read… Panicked Hedge Funds Now Praying for a Miracle in Greece Test  

Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.

  36 comments for “Why Greeks Still Want to Keep the Euro, in One Chart

  1. BoyfromTottenham says:

    So the Greek populous wants Greece to stay in the Euro because it protects them from the Greek government’s debasement of their currency by it’s irresponsible management of the country’s economy. So then who pays for the Greek government’s irresponsible management of the Greek economy? The rest of the EU. No wonder the EU wants control over the Greek economy. But if it were not for the Euro, the whole problem would belong to Greece, instead of the whole EU. So what is the point of the Euro?

    • Michael Gorback says:

      Greeks don’t like the domestic currency inflation that happens when hairdressers retire at 50 and a hospital has 14 gardeners and no garden. It’s not so much the government stealing from them by inflation, it’s the way they have set up their something-for-nothing economy.

      They like the euro’s stability and German-inspired low interest rates but don’t realize it entraps them in spiraling deficits and serial bailouts at ever-higher amounts. They’re learning that using an external currency means even if you don’t want austerity you’ll get it anyway by one of two routes: (1) Your creditors impose it on you or (2) you run out of money when the creditors turn off the tap.

      But Greece and the rest of the EZ have one thing in common: They desperately want Greece to remain in the euro. Therefore somehow, some way, they will manage to accomplish that because all of the leaders want to stay in power.

  2. Vespa P200E says:

    No surprise here as they want to continue to live off of OPM (other people’s money) not to mention new drachma might become another Zimbabwe dollar.

    • retired says:

      What they will end with is a dictatorship that will tell them to behave or else!
      In large measure this is the reality all over the western nations,…democracy is a failure! It is a failure because there is no sophisticated voting public which is willing to shoulder the responsibility of being political adults.All there are,all over Europe & America,is mob rule by entitlement junkies!
      Under these circumstances authoritarian rule is all that is left!

      • NotSoSure says:

        … and truly what these people deserve.

        As one gets older, you start to realize how the world can be pretty fair. There’s no free lunch and you truly reap what you sow.

      • Richard Hill says:

        What about Switzerland? By using referenda a lot the basic commonsense of the Swiss people seems to prevail.

      • Jerry Bear says:

        Yikes! I think you are being a little too reactionary. Are you really that willing to give up on the U.S.A. because it is no longer the same as it was when you were younger? you know, if you have the means to travel, now might be a good time for it, especially if you travel around within America. Maybe you could go to a regular bar that is patronized by working class and middle class men, buy a round of drinks then ask them how they think America is doing and what they think the future will bring? i fear you are listening to certain pseudoconservative demagogues spreading around doom and gloom. Opening yourself up to the new might add years to your life. Too much bitterness and fear roils in your message for the good of your soul. The great founder of American Psychology, William James, once stated, “The greatest discovery of my generation is that a man can change his entire life by changing his attitude.” If you feel despairing and hopeless, consider that you may have been manipulated into feeling that way and consider Dr, James advice. ^,..,^

      • d says:

        Current western liberal democracy is most defiantly a failure, as leftist socialists can buy elections, with more and more, long term untenable handouts, funded through deficits.

        Then continue to wag the dog, whilst in opposition, by protecting and entrenching those, long term untenable handouts. Forcing the growth of deficits to fund them.

        Returning to office, to rise and repeat. To whit, greece.

        Osbourne dropped a bombshell, that has for the moment been buried.

        He proposed making Deficits lllegal. Possibly before long term infrastructure project spending.

        This would not cure all the ills of Western (Far to) Liberal Democracy. It would be a good starting point.

      • Ray says:

        Democracy fails because it is a irrational concept. The idea that the bigger gang can vote themselves money. Democratic organization can only work if my participation is voluntary and I can withdraw when I don’t like the outcome (i.e. when the outcome is exclusively at my expense).

  3. “…nearly unlimited cheap euros available that the government borrowed in dizzying quantifies and handed out liberally.”

    You cannot really blame the people for questioning “free” money (and any who did would never be heard above all the partying) , but those in charge of borrowing and redistributing that dizzying quantity of money had to know it would blow up at some point. Surely they weren’t thinking that some magical change in the Greek GDP would save the day.

    But “dizzying quantities of cheap money handed out liberally.” Greece ain’t the only country playing this game….

  4. Gee says:

    Im with ya, sort of. The thing is, if your currency is depreciating that fast, you could be somehow otherwise making up for the poor trade balance impact on GDP. The question is how? So you don’t necessarily know how the standard of living was changing for most folks over that period.

    But lets say that the euro adoption fixed one thing, no devaluation, but um, where is Greece now vs where it was at adoption, and ultimately, what did Greece gain? Seems like it just redistributed, upward in the income/wealth distribution, and pulled forward in time.

  5. AC says:

    I suppose one way to pay off their debt would be to sell Greek citizenship to north Africans, as long as they move to Germany. Mohammed Giannopoulos, anyone?

    • Vespa P200E says:

      Yeah revive the Onasis shipping empire by industry scale legit smuggling operation by docking ships in Africa, Middle East, China and maybe Mexico and bring the migrants to Greece with Greek citizenship for a song and 1 way train ticket to Germany. Take that Angie!

  6. Mark says:

    I propose this. All of this ” Greek Drama ” is nothing more then a spectacle to keep the masses entertained. In the end Greece stays in the EU and keeps there currency and will forever make payments on the Greek debit. Just like a true Greek Tragedy.

  7. Boyfromtottenham says:

    Mark, yes, but what about Italy, Spain, Belgium and the other debt-ridden members of the Eurozone? And what happens to this house of cards when interest rates finally rise and they are all insolvent? Greece times 50!

    • keith says:

      rates will only rise once the game has fallen over…….if they are allowed to rise…the game is over

    • chickweed says:

      Maybe that’s been the bigger, hidden plan all along.

    • Mark says:

      All gov’ts carry debit at some point. Some more then others. All business’s carry debit at some point as well some more then others. i think the EU will just keep adding more countries to the Union and the UK will have to fully join at some point as well. There is a limit to this though. The EU can only expand so far. And there end goal is to create the United States of Europe which would mean an end to all countries in the EU as each becomes a State. I think the only thing that can really cause a massive crash is either some unforeseen black sawn event that no one saw coming or WW3. WW3 would completely reset the system for everyone on the planet.

      It’s like the Debit in the US. It’s what 18 Trillion now? I think it’s going to keep rising up to 30 Trillion before something happens. Even an interest rate hike this year really won’t do anything. They’ve been blabbing about it for so long now that it won’t even matter anymore and in the end they will just do it, so they can say ” see look we raised the rates and the world didn’t come to an end ” 1% this year .5% next year. and maybe in 10 years the rate will be back up to 5%. Meanwhile it will take 10 years for that to happen in Canada because here in coo coo land we are always the tail behind the big dog.

      On things for certain I certainly would not want to be the leader of any Nation on the planet this century. Worst is yet to come folks.

      • Jerry Bear says:

        The United States was a debtor nation for most of its history up to WWII. We had large amounts of resources but lacked the capital and manpower to develop them. European countries (especially Great Britain) were willing to generously lend capital to us because they knew the resources were there to be developed. The manpower we obtained by actively encouraging immigration.

  8. Heinrich Leopold says:

    Greece is the big winner in this game. 40 % of the Greece budget is spent for interest and principal payments, which is now spent on pensions etc. Greece needs a soft currency, which ensures high interest rates and prevents going too much into debt.

    I worry for the rest of Europe and the US, shouldering a huge debt mountain around their necks.

    • chickweed says:

      …and all countries with a large number of old people expecting younger people to pay their way. Oops, turd in punchbowl, sorry.

      • Jerry Bear says:

        The idea that young people are supposed to carry the old people is deeply misleading. These people paid into Social Security all their working lives with the idea that the return on this money was what was supposed to pay for their old age. What the young people pay in is supposed to pay for their old age when it comes. But politicians were just far too fond of stealing social security funds to pay for pork barrel projects and unmerited and unwise tax cuts for the rich, we have a problem. The easiest way to solve it is to just remove upper income limits on paying social security so the wealthy have to make payments on their entire income, not just the first 100,000. Since the wealthy benefited from the current situation by corrupting politicians to allow excessive tax cuts for the rich, they should be the ones to correct the situation. But oh the howls of anguish and outrage that will result!

  9. Dan Romig says:

    Anyone who is interested or concerned about the situation in Greece may want to read, Goldman Sachs Doesn’t Have Clean Hands in Greek Crisis’ on

  10. Julian the Apostate says:

    I’m beginning to agree with the Anarcho-capitalist that government is not a necessary evil, it’s just evil. Didn’t someone see this would lead to problems down the road? Well sure, but when you live in the range of the moment, tomorrow has to fend for itself. But look at the math, you say. They look at the math and say but I can buy all these votes now instead of fixing this problem and besides, I won’t be in office then. And this problem may or may not happen.
    Democracy is mob rule, and mobs operate on negative emotions, not rationality. There is no difference in the 30 Tyrants of Ancient Greece and Brussels now, or the Obama police state now, except they have better tech. If Lenin could run Russia from 2 phones on his desk imagine what he could have controlled with a computer! “It’s not that power corrupts, but that it’s magnetic to the corruptible.” -Frank Herbert

    • “…I can buy all these votes now instead of fixing this problem and besides, I won’t be in office then. And this problem may or may not happen.”

      How many times are the people (not just in Greece) going to allow leaders and politicians to run this same rinse-and-repeat before finally saying, “Enough!”

      • MC says:

        Plato wrote “This city is what it is, because its citizens are what they are”.
        Ludwig Von Mises wrote “No government, no matter how tyrannical, can ultimately survive without at least the silent consent of the people it rules over”.

        Both these great thinkers ultimately believed a government is nothing but an expression, no matter how distorted, of the people it rules over.
        Both men were also extremely wary of democracy as we intend it. Plato held it in snobbish contempt, much prefering the rule of a caste of wise men or what us Europeans came to call an “enlightened despot”, while Von Mises was basically a minarchist, convinced that since government is nothing but necessary evil, it should be kept as small and its responsibilities as limited as possible to avoid the mob from taking over.

        It’s very easy to think politicians such as the Papandreou and Karamanlis clans bribed the Greek people into keeping them into power for decades, but we should not forget the Greek people must have ultimately known this situation was unsustainable. I am sure Greece has had over the years an abundance of wise and observant persons who warned their countrymen about the dangers of the system and explained to them the drachma was being constantly debased to pay under the table for all those early retirements and “for life” government jobs. That they were completely ignored says it all.

        In the end reality caught up with everybody, including the politicians: the Papandreou clan was wrecked first by scandals too monumental to be ignored and finally wiped out by its poor handling of the liquidation phase which followed the crazed debt binge of 2003-2008.
        I have no doubts about the personal honesty and integrity of Mr Tsipras and his allies, but in a way they are nothing more than an extension of the system which wrecked Greece. Not once I’ve heard them say “It’s time to eat humble pie, admit our mistakes, liquidate debt and roll up our sleeves”, not once they’ve said “The old overgenerous system is over and will never come back”. Their promises to curb corruption and waste are commendable, but those things do not fix budgets. In the 90’s Sweden, regularly near the top of any list when it comes to lack of corruption, was very nearly bankrupted by a combination of overgenerous welfare and high taxes to pay for it and what saved them was not empty slogans and lofty-sounding promises, but admitting they had a problem and working to solve it, even if this meant cutting welfare.
        The ECB, the IMF and the EU played into this. They shrewdly reminded the desperate Greeks if they still want to live beyond their means, they need the euro. They reminded them in 2002 the ECB turned the other way when Greece cooked the books to get into the EMU. They reminded them the 2004 Olympics, a triumph of waste and corruption that makes the House of Saud look like a paragon of integrity, was only possible because everybody turned the other way.

        When I was a small boy in the 80’s, we were regularly told this story to keep us off drugs. A dealer gives a boy some dragon. The boy wants to pay for them but the dealer tells him they are on the house. The boy tries the dragon and likes it so much he comes back for more. Again they are on the house and again for the third and fourth time, until the boy is hooked.
        At that point the dealer will start demanding money. Not much at first, but each and every time the price increases as the addiction grows on.
        When the boy is a junkie, the dealer can ask any price he wants.
        The boy now has a choice: he can either enter rehab and kick the addiction or be a slave to the ups for the rest of his life.
        He asks around and hears rehab is very tough stuff. Withdrawal is the most painful thing you can imagine, he’s said. Hence he starts stealing money from everybody to fund his habit.
        One day a police patrol spots a body near the river: it’s that boy they arrested a couple of times in the past few months for stealing money from old ladies. He has a needle stuck in his arm and his ragged and filthy clothes are smeared with vomit.
        That’s a story somebody should have told the Greeks…

        • “That’s a story somebody should have told the Greeks…”

          That’s a story somebody should tell a lot of countries and their people….

          Eventually we do get what we deserve, no matter how long we delay the inevitable.

        • Jerry Bear says:

          When the ECB, IMF and others made all those loans to the corrupt Greek government of the time, they knew perfectly well that the Greeks would never be able to pay them back. The real purpose was to use the loans as leverage so they could help themselves to anything worth having in Greece, The people have had their effective sovereignity undercut again again by the troika and their flunkies in Greece. The Greeks are NOT “living beyond their means”. They are barely surviving at all. Health care exists only for those with the means to purchace it. Hunger and destitution stalk a large part of the populace. The Greek people are facing dire, 3rd World levels of poverty. To tell them they need more austerity is like a doctor telling an emaciated half dead patient suffering from terminal anorexia that they need to immediately go on a severe diet and prolonged fast. No measures that the Troika is willing to allow can ever enable the Greeks to pay off their loans and the troika damn well knows this. It is not their intention for the Greeks to ever pay off those debts. The troika wants crushing, never ending hunger, destitution, and desperate poverty to be the lot of the Greek people and for them to be crushed underneath the Euro tyranny. they want to own everything of value in Greece and dispossess the Greek people of their own nation. They want to do this in collusion with the criminal minded financial elite who run Greece behind the scenes and are utterly indifferent to the fate of the nation or their fellow countrymen. The only way out for the people of Greece is to completely sever all their links to the EU, disavow the usurous debts that were criminally imposed on them to enslave them, reestablish their own currency and independent banking system, and start rebuilding their nation. Sure there will be all kinds of difficulties and hardships, but at least this way they will have a chance. They have no chance at all if they fail to overthrow the tyranny of the troika and their irredemiably corrupt ruling class, not to mention the horrrific and villanous scheming of the Euro elite who are eager to impose slavery on the great majority of the European people. Eleftheria!

    • chickweed says:

      ” Didn’t someone see this would lead to problems down the road?” I think someone in the US must have, otherwise why sell fiat US bonds to China for boomer benefits? Sorry again, another punchbowl contamination.

    • Jerry Bear says:

      How can you honestly call yourself an American if you dont believe in ANYTHING this country stands for? Do you really think it is enough to have been born here? To despise the concept of Democracy is to despise America itself and the American people. We didnt become the greatest nation on Earth because we were staunch promoters of dictatorship, aristocracy, the divine power of kings or theocracy! Instead, countless millions of people came to this nation and gave their best efforts at building up their new adopted land because they were fleeing the grim, hellish lives they had been condemned to by governments that followed the above mentioned philosophies of government. If everybody stops believing in America like you apparently have then this nation will die. A century from now tourists will be visiting the picturesque ruins of Washington D.C. wondering at the fate of a once great people who stopped believing in themselves. I cannot imagine anything more unpatriotic or Antiamerican if you really think it through! Think that you may be wrong! I know there are treasonous slime that go around preaching the destruction of America in the mass media for their own profit but don’t listen to these types. You are at great risk of developing AIDs of the ears. You get it from too much listening to a**holes!

  11. Indeed the chart is right to a point:

    The euro = gasoline. No euro no driving, gas lines, rationing, etc. Underway in Greece is ‘Conservation By Other Means™’.

    Conventional wisdom is the Greeks are shiftless thieves who love to spend others’ money and do nothing to earn it. What they are getting (robbed) from the EU and IMF is exactly what they deserve.

    The Greeks are no different from the Germans or anyone else; everyone uses other people’s (borrowed) money. The shiftless thieves are the bankers who made the (free) loans to Greeks as soon as they had access to the euro. These loans were vender financing for German automakers who profited from the sales. Greece and the other European countries were — and are — economic captives of mercantile Germany! Where else can a Greek (or German) spend a euro but in Europe? What sort of good would he buy with the cheap German bank financing.

    Sadly, the goods sold to Greece did not provide the means for Greeks to earn anything. Driving a car does not pay for it … nor does it pay for the fuel, the roads, the real estate … the Olympics. What pays is debt and lots of it. Right now Greece borrows millions of euros per day to hand over to Saudi Arabia … in order to keep its worthless fleet of style machines on the road. This is simply shoveling good euros down the rathole.

    Now the piper must be paid, the absence of return has bankrupted Greece … along with Europe and the rest of the world. How the ruin plays out is irrelevant: what is underway in Greece is easier on the Greeks than alternatives. The Greeks can look toward Syria, Ukraine or Yemen. Not to worry: without some changes including stringent, voluntary conservation … war will come to Europe.

    Coming to a suburb near you.

  12. Jerry Bear says:

    Didnt Winston Churchill once say that democracy was the worst form of government except for every other kind? We have to make democracy work, not destroy it because it isnt perfect. I honestly don’t know of any form of authority that doesnt basically make me shudder. Nothing encourages evil in human nature more than giving someone power. I am more pragmatic than you might think. I do not expect things to be ideal or perfect. I understand this world we live in is not paradise nor is it heaven, and I very much doubt we were sent here as a reward for being good. But I think that we can make the world work in the long run. We do not have to be a dark and cruel planet of unmitigated savages, too ferocious and bloodthirsty for any civilized world to contact. Surely another world is possible! We really dont have to live like this. Not if we truly are rational beings.

    • d says:

      Not all rightist Administrations are financially prudent. Their imprudence generally runs to, wars, bridges to nowhere, etc.n all short term things.

      Most Socialist leftist Administrations are deliberately financially imprudent, to fund future votes. Their imprudence generally runs to handouts and state department make work schemes Etc. all quickly entrenched and long running deficit funded expenditures.

      This leftist vote buying, deficit funded, wag the dog, element of western democracy, is what must be changed before anything else. To possibly make it into something tenable with out repeated Major: Financial crashes,and wars.

      As Socialist leftist, Wag the dog rule, is in fact, clandestine, french revolutionary Street Mob rule.

Comments are closed.