European leaders have given Greece time until Friday, July 10th, to reach an aid-for-reforms deal with its creditors or risk bankruptcy and banking collapse. Which currency option is best for the future of Greece?
Bitcoin is always ready to lend a willing hand whenever a country suffers any kind of liquidity crisis. It does make sense in a situation with Greece.
While Greek citizens recently found themselves in a situation where they could only access 60 euros per day from their bank accounts, the citizens that owned Bitcoin had access to all their Bitcoin — not just 60 euros’ worth. Certainly not many stores in Greece accept Bitcoin as payment, however, the advantages of Bitcoin remain overwhelmingly positive.
“There is no government anywhere that would decline to shut the banks if the ruling class fears financial meltdown. That’s what’s happening in Greece. That could happen in any European country. And it could happen in the U.S. too,” commented economist Jeffrey Tucker.
“In the end, the government regards itself as the owner of all a nation’s currency and the wealth it carries. It’s wise to have another option, and people have long known that. The question is: what is that option? Bitcoin is here to save the day,” he added.
Thanos Marinos, the founder of Greece’s only Bitcoin exchange, says bitcoin demand has jumped by 500% in the latest weeks, according to CryptoCoinsNews. Mr. Marinos adds that when he began his exchange BtcGreece, there were 5 to 10 clients per day, now there are 15 to 200 clients making deposits.
While the fear of currency collapse remains very real in many economies, Bitcoin does not have this problem, as it is not dependent upon governments which can fail.
“While Bitcoin is too deflationary by nature to act as a widespread currency alternative to the dollar or the euro, its design can be used profitably in order to help the Eurozone’s member-states create euro-denominated electronic payment systems that help them, at least in the medium term, overcome the asphyxiating deflationary pressures imposed upon them by the Eurozone’s Gold Standard-like (and, indeed, Bitcoin-like) austerian design,” stated Yanis Varoufakis, a former Minister of Finance of Greece.
“I didn’t see it as much as a business case back then,” says Marinos. “The main reason was to bring awareness about bitcoin and block chain technology to Greece.”
However, one of the currency options available to Greece is to “adopt” the euro, even if it left the euro zone as in countries like Monaco, Andorra, San Marino and Vatican City. The countries all use the euro as their national currency, despite not being euro zone member states.
The European Commission, the European Union’s executive arm, allows these countries to issue limited amounts of euro coins. However, they are not allowed to print their own banknotes: only the European Central Bank (ECB) can authorize the issuing of issue euro banknotes.
Another option for the country is to turn back to its pre-2001 currency, the drachma, leaving the euro behind.
“The key thing is that it 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,” commented Roger Bootle, executive chairman of Capital Economics, explaining that the government might issue IOUs in the interim.
However, as said by Jane Foley, a senior currency strategist at Rabobank, adoption of any new currency—whether or not it’s called the drachma—would result in further defaults. Greece has already effectively defaulted on a 1.5-billion euro ($1.6 billion) payment to one of its biggest creditors, the International Monetary Fund. 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[s] the devaluation that comes with running your own currency,” Bootle said, meaning that it is unlikely to be an easy transition, but it appears to him this is the country’s best option.
Zhanna has a background working for an American multinational food and beverage company as well as at a number of translation agencies serving similar top multinational corporations. She enjoys discovering new cultures as well as learning new languages. She is also a lover of all things fabric and floral ,especially if they are design-related. Zhanna is a graduate of Belarusian State Economic University with a major in Intercultural Business Communications.
