News & Analysis
Printer Plans for Greek Drachma
UK banknote printer readies for Greek call - source ... De La Rue (DLAR.L) has drawn up contingency plans to print drachma banknotes should Greece exit the euro and approach the British money printer, an industry source told Reuters on Friday. The news comes as EU trade commissioner Karel De Gucht said on Friday the European Commission and the European Central Bank are working on an emergency scenario in case Greece has to leave the euro zone - the first time an EU official has confirmed the existence of contingency plans. – Reuters
Dominant Social Theme: What? What printer? Hey, what's the drachma?
Free-Market Analysis: Here's an interesting article, one telling us that one of the world's largest private printers of currency is ready to print Greek drachmas.
Anyone who follows the financial news is well aware that Greeks may soon be forced to re-adopt the drachma and give up the euro ... or actively make an aggregate decision that such an adoption is preferable.
Currently – and surprisingly – opinion polls show that most Greeks want to stick with the euro that has caused them so much suffering. But this view is tempered by a certainty – so say the polls – that Greeks who have this viewpoint also believe that they are (like banks) "too big to fail."
In other words, at least some Greeks believe, perhaps the majority, that while the euro has done much damage to their economy, the larger damage is to be alleviated by further European Union contributions.
We're not sure where this mystical faith comes from. In fact, we're not sure we believe the polling on this issue.
The Greeks certainly seem angry at their elites for the way government spending has been handled in the context of the euro so it seems somewhat unlikely that a majority of Greeks are actually pro-EU at this point.
Not long ago, a referendum was proposed and Brussels promptly shut down this idea by removing then-President George Papandreou. Obviously, there is sensitivity about what the Greeks really believe and really want.
Brussels is not willing to chance it. Again, we question polls that seem to show the Greeks are rabidly pro-EU at this point.
We question much else as well, especially since the reporting on these issues seems so chaotic. The EU itself – its leaders – have never seemed so schizophrenic as today. For every statement there is a counter-statement. For every policy prescription there is another, seemingly opposite one.
• German Chancellor Angela Merkel is pro-austerity but willing in some sense to compromise and provide more funds for Greece.
• The Greeks have removed their government for cooperating with the EU but sentiment is apparently rising for re-electing a pro-bail-out administration.
• The Northern EU bloc remains firmly in the austerity camp but in Brussels the conversation about "growth" is quickly superseding that of endless cutbacks and higher taxes.
To make sense of all this is most difficult because of the push-and-pull of EU politics. Tomorrow, Bloomberg tells us, there will be a further showdown over these issues at an EU summit. (These seem to take place every week now.)
According to Bloomberg, the upcoming event will be significant because it marks the first time the new French president (pro-growth) faces off with the Iron Chancellor. Here's how Bloomberg puts it:
Germany and France, the biggest euro economies, are headed for a showdown at tomorrow's European Union summit over their views on how to stem a debt crisis that threatens the single currency's survival.
German Chancellor Angela Merkel said she won't shy away from disagreeing with French President Francois Hollande at the summit in Brussels over dinner at 7 p.m., the next major appointment of leaders seeking to allay concerns that Greece may quit the euro, putting Spain and Italy at risk as well.
Good cooperation "doesn't exclude differing positions," Merkel told reporters yesterday in Chicago during a meeting of the North Atlantic Treaty Organization. "These may very well arise in the context of the European discussions."
While Franco-German collaboration has been a cornerstone of post-World War II policy making, Merkel and Hollande, France's first Socialist president in almost two decades, have gotten off to a rocky start in a relationship that needs to work to spur economic growth and prevent Greece from leaving the euro area.
The Bloomberg article also tells us that Merkel is under continuing pressure to okay the issuance of EU-wide bonds. Presumably this is seen as an alternative to continued money printing by the ECB.
What's interesting about this is that the money printing the ECB is doing is controversial in Germany. How in heck would printing Euro-bonds be considered any less of a subsidy?
The Southern PIGS certainly wouldn't be able to issue them on their own. In fact, Germany would be responsible for these bonds, which would be issued out based on Germany's faith and credit. Additionally, Germany doesn't need to issue bonds in this manner.
The EU's ruling class has never seemed to us to be so filled with uncertainty. The news has never seemed so contradictory and puzzling.
The narrative seems to have gone awry in ways that it usually does not at this level. The power elite that orchestrates this sort of thing is increasingly tuneless. The promotion seems broken.
Of course, the agenda of the powers-that-be is to create additional chaos and economic pain in order to force further EU centralization. But we don't sense a great discipline at this point. There is a fine line between controlled and uncontrolled chaos.
Conclusion: We sense a certain amount of fear that the EU could in some sense unravel entirely. If so, then the drachmas that De La Rue is apparently getting ready to print will surely come in handy.