Sir, – There is much loose talk of Greece (population 11.3 million) “leaving the euro” with some economists and commentators even raising the possibility of a “return” to the drachma or a “new drachma”. None of these scenarios is workable, desirable or even necessary.
What should be under discussion is the possibility of Greece “leaving the euro zone” but continuing to use the euro – a process with the unfortunate and confusing name of “dollarisation”. The term is used where a country adopts the currency of another in place of its own. Current examples include Panama (population 3.4 million), El Salvador (population 6.1 million) and Ecuador (population 15 million) which have officially adopted the US dollar as their national currencies. An earlier example is Ireland which effectively used sterling as its currency for over 100 years before the arrival of the punt and later the euro.
The euro is already used in countries which are not members of the euro zone – notably Kosovo (population 1.7 million), Montenegro and micro-states such as Andorra, Monaco, etc. By agreement some of these countries are even permitted to issue their own euro coins.
The governor of Greece’s central bank, the Bank of Greece, would probably have to forfeit his seat on the Governing Council of the European Central Bank, but this is a small price to pay for the stability which the euro provides, viz: 1. A stable store of value. 2. An excellent international medium of exchange. 3. A currency which has stable and very low official interest rates which help to fight inflation.
The alternatives of a “return” to the drachma or a “new drachma” hardly bear thinking about in respect of these three vital characteristics.
If Greece leaves the euro zone but continues to use the euro, the focus of the European Commission (and the world’s media) could then return to where it should be – on the sovereign debt crisis and not on a completely unnecessary and damaging currency crisis. – Yours, etc,