28 April 2019
Battered coins and ragged banknotes
are a metaphor for the Greek economy
Walking through the streets of Rethymnon at the weekend, I came across a stash of old money that was as good as being given away for nothing.
Old banknotes, old coins, well-worn, battered, torn and in tatters, randomly put together without selection or discrimination, they were piled up in old tin boxes outside Παλαιοπωλειο (Palaiopoleio), a colourful antiques shop across the street from Aghias Varvaras (Saint Barbara) Church in the centre of the old town.
What these coins and banknotes must have bought in the past. But they are worthless now, piled up like junk in old tin boxes, the torn notes held down by a rusty weight to prevent them being scattered in the light breeze.
In one way, they are invitations to come in on off the street and explore the Alladin’s Cave of treasures inside the shop. But in another way, this random and ragged collection of paper money and spent coins is like a metaphor for the Greek economy or like a farewell to the stories of Greece’s past economies.
At the end of last week, Standard & Poor’s stopped short of raising Greece’s sovereign rating, confirming it at B+ with a positive outlook, although the market had widely anticipated an upgrade.
Standard & Poor’s praised Greece’s fiscal progress and noted the favourable debt restructuring it has secured. But they referred to a number of risks, including a possible backtracking of financial reforms before this year’s general election campaign, as well as the international environment that is causing uncertainties.
The European Parliament elections take place at the end of next month and a general election is due in October. Speculation that they general election may be called earlier has died down in recent weeks.
With this latest Standard & Poor’s rating, Greece remains four notches below investment grade, deep into junk territory. All other major rating agencies have kept Greece in junk status: Moody’s has given Greece a B1 rating while Fitch has retained its BB- rating since last August, just before Greece emerged from its last bailout programme.
Who would wish to return to the days of the Drachma and the Lepta?
The Drachma (δραχμή) was the currency in Greece throughout several periods in history. It began as an ancient Greek currency unit issued by many city states over a period of 10 centuries, from the Archaic period throughout the classical period, the Hellenistic period up to the Roman period under Greek imperial coinage.
Greek banknotes have a history of 180 years, beginning in 1822 and finishing in 2002 when the Drachma was replaced by the Euro. During these years, about 300 different banknotes were issued or circulated in Greece and if you count the varieties, the total number reaches the 400.
The drachma was reintroduced in May 1832, shortly before the establishment of the modern state of Greece, and the drachma was divided into 100 lepta.
Notes were issued by the National Bank of Greece from 1841 until 1928, when the Bank of Greece was created. Early denominations ranged from 10 to 500 drachmae. Smaller denominations (1, 2, 3 and 5 drachmae) were issued from 1885, with the first 5-drachma notes being made by cutting 10-drachma notes in half.
Greece joined the Latin Monetary Union in 1868, and the drachma became equal in weight and value to the French franc.
When the Ottoman occupation of Crete ended in December 1898, the Cretan government under Eleftherios Venizelos established the Bank of Crete with the assistance of the National Bank of Greece. For 30 years, the Bank of Crete had the exclusive privilege of issuing banknotes in Crete.
Between 1917 and 1920, the Greek government issued banknotes worth 10 lepta, 50 lepta, 1 drachma, 2 drachmae, and 5 drachmae. The National Bank of Greece introduced 1,000-drachma notes in 1901, and the Bank of Greece introduced 5,000-drachma notes in 1928. The Greek government again issued notes between 1940 and 1944, in denominations ranging from 50 lepta to 20 drachmae.
The shortage of banknotes became so severe in 1941 that the government authorised an emergency issue of old, worn-out notes from previous issues that were awaiting destruction at the at the Bank of Greece. The punch-cancelled notes remained in circulation for another year before finally being replaced.
During the German-Italian occupation of Greece in 1941-1944, catastrophic hyperinflation and Nazi looting of the Greek treasury led to much higher denominations being issued, culminating in 100,000,000,000 drachma notes in 1944.
After Greece was liberated in November 1944, old drachmae were exchanged for new ones at the rate of 50,000,000,000 to 1. Only paper money was issued. The government issued notes of 1, 5, 10 and 20 drachmae, with the Bank of Greece issuing 50, 100, 500, 1,000, 5,000, and 10,000 drachma notes. This drachma also suffered from high inflation. The government later issued 100, 500, and 1,000 drachma notes, and the Bank of Greece issued 20,000 and 50,000 drachma notes.
In an attempt to halt inflation, Greece joined the Bretton Woods system in 1953, and the drachma was revalued a year later at a rate of 1,000 to 1, with the new currency was pegged at 30 drachmae to $1 (US). The Bretton Woods System was abolished in 1973, and over the next 25 years the official exchange rate gradually declined, reaching 400 drachmae to $1. The Greek drachma was officially replaced by the Euro on 1 January 2002, and it has not been legal tender since 1 March 2002.
Now these old notes have no currency. Their condition makes them useless and worthless, even to collectors. But they are a reminder of times past, when I wandered around with pockets full of notes with high numbers and low value.