What would happen if Greece really left the eurozone? This is the dilemma of the last days. A question all the more distressing because there is no certain answer, not even if you want to ask the most renowned world economists. School studies and hypotheses chase each other, but the truth is that, when the single currency was built, the hypothesis that any of its member states could choose to go back was not even taken into consideration.
We are therefore in the realm of the unknown, but the political crisis in Athens seriously threatens to unravel the mystery. Next month the Greeks will return to the polls and Syriza is currently leading the polls, the radical left-wing party that intends to reject the austerity pact signed by the country with the EU and the IMF for the sending of international aid worth 130 billion euros . If this really will be the political line of the next Greek executive, we will certainly find out what the farewell of a single country to the currency area entails.
Let us now see what consequences Greek citizens and Europeans in general will probably have to suffer. We derive the data from an analysis published in the Corriere della Sera.
BONDHOLDERS: MORE LOSSES FOR CREDITORS
The financial institutions and individuals who hold Greek government bonds have already had to join the so-called "swap" (exchange of the bonds in the portfolio with other bonds with longer maturities and lower yields), which led the bonds to lose more than 70% of their value. If Greece left the Eurozone, all the bonds issued by the Treasury of Athens would be converted into drachmas (except those governed by the laws of other countries) and this would entail new negotiations between the creditors and the Greek government to renegotiate the value of the titles. There is therefore no certainty of bringing home that 25-30% due today.
THE CHANGE: DRACHMA IN FREE FALL
If we went back to the drachma, the initial exchange rate would probably start from the one used for the conversion of the old currency into euro back in 2001 (340,75 drachmas for one euro). However, a rapid and violent devaluation process would begin immediately, which according to Citigroup analyzes would reach up to 40%, while according to UBS analysts it could go up to 70%. The weak currency would benefit exports (which, however, are quite small at the moment: about half of imports), but it would be a disadvantage for the purchase of raw materials, while companies and individual citizens would see costs skyrocket.
INTEREST RATES: MONEY IS PRINTING AND INFLATION GROWS OUT OF CONTROL
Despite being part of the monetary union, the tragic conditions of the Greek economy have already led the country to pay stellar yields on government bonds (the record for ten-year bonds is 31%). It is easy to imagine a further surge after the eventual abandonment of the eurozone. At that point it would be practically impossible for the Treasury of Athens to finance itself on the market: it would become necessary to beat cash by raising taxes or printing new currency, which would give rise to inflation.
MORTGAGES: THE INSTALLMENT COSTS HALF SALARY
For the Greeks who are in debt, there would be virtually no escape. Mortgage installments (even those with fixed rates) would be recalculated month by month according to the exchange rate between the drachma and the euro. If the devaluation were just 25%, a twenty-year mortgage of 100 euros with a rate of 5% could cost 41% of the salary for those who have earned 2.000 euros a month to date. If the drachma really lost 50% of its value or more, the installment could cost 50% of the monthly salary.
