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GreekReporter.comGreek NewsEconomyJanuary 2002: Greece Enters the Eurozone

January 2002: Greece Enters the Eurozone

Greece eurozone
The European Parliament is commemorating 20 years of the euro currency. Credit /Wikimedia Commons

It has been twenty years since Greece’s accession to the eurozone, an anniversary that has been overshadowed by the spread of the COVID-19 omicron variant.

It was 20 years ago this month that Prime Minister Costas Simitis went to an ATM and withdrew euro banknotes in front of the cameras, ushering Greece into a new era.

“We achieved this success after a systematic effort by our government and the whole society. We achieved a national goal that we achieved,” Simitis said in a written statement on the annversary of Greece entering the eurozone.

“It was a victory that protected our country during difficult times and adverse conditions. It was the right choice, at the right time, following a national effort,” stated the former Prime Minister today.

Simitis pointed out that today Greek people have recognized the value of the euro, which has facilitated the country’s economy and the daily lives of its people.

The former Prime Minister said that the eurozone was the first step in the project of a united Europe, a goal that is an absolute need today, in the era of great geopolitical changes.

Greece in the Eurozone

At the time, however, Greeks had great difficulty in incorporating the new common currency into their daily lives. One euro was 340.75 drachmas, and as a result the conversion from the Greek coin to the new currency was hard to calculate in their heads.

When Greece entered the eurozone, drachma coins were rarely used in transactions outside supermarkets and street markets. The 100 drachma notes were used widely, but the value of those bills was less than one third of one euro.

Therefore the transition to a coin of such high value was difficult because Greeks were not used to transactions with coins.

The fact that there was no one-euro banknote — like the one dollar bill — made it very hard for Greeks to calculate the value of the new coin in their head.

The same about the 50 cent, 20 cent and 10 cent coins: Greeks had difficulty in adapting to small coins that had the value equivalent to 170, 68 and 34 drachmas respectively.

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Former Greek prime minister Costas Simitis withdraws the first euro banknotes. Screenshot from YouTube.

Many merchants and service providers unfortunately used this difficulty to adopt to the new currency to their advantage, rounding up the price of goods and services — and in many cases, rounding them way up.

For example, a bottle of water which had previously sold for 100 drachmas in a kiosk was rounded up to 50 cents (170 drachmas), and so on.

In street markets, a kilo of oranges that used to sell for 50 drachmas was sold for 30 cents (100 drachmas).

At the same time, of course, wages and salaries in both the public and private sectors were calculated at the exact exchange rate of the drachma (340.75 drachmas to one euro).

It took some time for Greeks to become accustomed to the new currency — and some government intervention to enforce pricing policies that would stop profiteering as well.

However, the Greeks were not alone. In all European countries there were some euro detractors who blamed the use of the single currency for not only rising prices but also the loss of national monetary sovereignty.

Euro and the economic crisis

The common European currency and the European Union itself became targets for disgruntled Greeks during the economic crisis that ravaged the Greek economy and households during the 2010s.

Mass demonstrations across major Greek cities called for the country to leave the common currency and return to the drachma, while demonizing the EU and the International Monetary Fund, Greece’s lenders in the bailout.

During the 2015 negotiations between the Greek government and its lenders, the concept of a Grexit seemed close to becoming a reality.

Some economists argue that the lack of a national currency had dramatic consequences for a country like Greece that has an economy based on tourism and agricultural exports.

Under different circumstances, Greece could mitigate the negative consequences of the economic crisis by devaluing its national currency, as it has done many times in the past.

In the past, when the drachma fell, Greek products automatically became cheaper, therefore more attractive abroad. Holidays for visitors from the north also became even more economical. The adoption of the euro eliminated this possibility.

On the other hand, other economists argue that if Greece was not in the eurozone, apart from the final collapse of its economy, today it would have about one trillion euros in foreign debt.

Eurozone history

A European Monetary Union was a concept that took an entire decade to materialize. The aim was the coordination of monetary policies between European Union countries.

A single currency offers many advantages: it makes it easier for companies to conduct cross-border trade, the economy becomes more stable, and consumers have more choice and opportunities.

The new Treaty on European Union, which contained the provisions needed to implement the monetary union, was agreed at the European Council held at Maastricht, the Netherlands, in December 1991.

After a decade of preparations, the euro was launched on January 1, 1999: for the first three years it was an “invisible” currency, used only for accounting purposes and electronic payments.

Coins and banknotes were launched on January 1, 2002, and the biggest cash changeover in history subsequently took place across 12 EU countries. Greece was in the first group to enter the eurozone.

It was a vast financial operation, probably the biggest in history: the European Central Bank printed more than 15 billion euro banknotes and some 52 billion coins were minted before January 1, 2002.

Bills and coins of the new currency were printed and minted indivudually for each country, featuring the language and symbols of each particular country.

Gradually, seven more countries of the 27 EU member states entered the euro zone.

Today, the 19 EU countries that use the euro as their official currency are Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.

 

 

 

 

 

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