By Jessica Hodgson
Drachma notes, Greece’s former currency.
Amid the myriad concerns facing the Greek government at the moment, the mechanics of reviving now-defunct drachma banknotes may sound like a sideshow.
Normally, it takes around six months to prepare a brand new currency for launch. That’s before its integration into the telling machines and other areas of a modern society.
Yet it emerged Friday that De La Rue, the U.K.-based banknote printer, has discreetly started to prepare for the revival of the drachma (or an alternative currency).
An industry participant, who confirmed a report in Friday’s Times of London, stresses that the development is driven by De La Rue itself for its own commercial reasons, as opposed to it being the result of a direct request from the Bank of Greece or any other government agency.
[The Bank of Greece has repeatedly declined to respond to questions as to whether it is preparing a contingency on banknotes and Friday again declined to respond.]
It’s unclear how long De La Rue has been working on the plan, how developed it is and whether others are also working on similar strategies.
But even in the best case scenario — that De La Rue and other commercial banknote printers — have fairly advanced plans in place for the back-up currency, the scope for hitches and delays before the new (or old) currency could get up and running are huge.
One analyst, speaking on condition of anonymity, notes that for the kinds of simple banknotes used even in relatively undeveloped economies, up to 20 different security mechanisms are routinely put into a typical banknote to prevent counterfeiting.
These have to be rigorously tested before being vetted by central banks. That’s leaving aside the more superficial, but no less important, concerns of symbolism and design for the currency.
Ted Scott, director of global strategy at FC Investments in London, notes that introducing new banknotes wouldn’t only require new notes, but a major infrastructure overhaul across the country, with everything from ATMs to corporate payroll software likely to require expensive upgrades.
Because of the difficulty, Mr. Scott says, the “ideal situation” would be for the drachma to be reintroduced slowly, allowing euros already in the economy to trade as legal tender while introducing the drachma through those parts of the economy which flow directly from the government, such as state employee salaries and pensions.
“It would be a logistical nightmare to introduce only drachma,” he said. “Much easier to do it gradually.”
If a crack currency printer is required for the job of reintroducing the banknote, De La Rue is certainly among the best qualified, having helped the launch of the Iraqi currency for the U.S.-led coalition in 2003 in under three months.
It pulled off a similar feat more recently when it helped the South Sudanese government launch a currency in a similar time frame.
But for a relatively complex, developed economy like Greece, with its web of connections to the broader euro zone and the rest of the world, and in the eye of the European economic storm, the stakes could hardly be higher.
And with a caretaker government currently in charge of Greece, further political instability likely and — until now — official denial from politicians that a euro exit was even a possibility, it seems unlikely that sound plans have been underway for long enough to make a smooth changeover likely.