How would a Greek transition out of the euro go?

by Tyler Cowen

Marginal Revolution
June 21, 2011

Forget about the macroeconomics for now, I am thinking about the sheer mechanics of it.

If Greece announced it was leaving the euro, it might declare a bank holiday. For some number of days, no one can pull their euros out of the bank (otherwise all euros leave the Greek banking system). The government would have to put a money stamping technology in place fairly rapidly. Once the banks are reopened, withdrawn money gets a stamp and it is now a “Greek euro” or “drachma euro,” trading at a lower value of course. Is there an indelible, irreversible money stamping technology and how long would it take to distribute it to every Greek bank? How about ripping off one corner of the bill? That wouldn’t take long. Would corrupt bank tellers, handing out notes but refusing to rip them, undercut such a plan?

There would be a relative windfall for those who held their wealth in the form of currency rather than bank accounts. It is impractical to “round up” these cash balances and stamp them.

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