“Greek Euro-Exit Moonscape Result May Threaten Drachma Choice”

Business in Greece can hardly get worse for Pavlos Tziorkas’s technology-consulting firm as it battles a credit freeze in the fifth year of recession. That is, he says, unless his country were to leave the euro, Bloomberg reported.
As Greece gears up for its second election in as many months, companies and citizens are grappling with the possibility the nation will be forced to return to the drachma, 11 years after swapping it for a German-designed single currency meant to be an irrevocable step in European economic integration.
“A moonscape scenario, one where everything that is mobile leaves, is certainly one you can anticipate,” Michael Spence, a Nobel laureate in economics and professor at New York University’s Stern School of Business, said in an interview in Milan. “The short-term scenario is one of chaos.”

The June 17 Greek vote follows an inconclusive May 6 election that catapulted Syriza, a party that favors reneging on budget-cutting accords tied to 240 billion euros ($299 billion) in international aid, into second place. A Greek government that won’t stick to the bailout terms may fail to qualify for quarterly emergency loans from the euro area and the International Monetary Fund and run out of cash, leaving no option except to introduce its own currency.
The risks have prompted Intelli, whose clients include Greek units of French bank Societe Generale SA and of Dutch financial- services company ING Groep NV, to consider moving its headquarters to another country in the 17-nation euro. Possibilities include Luxembourg or Cyprus, said Tziorkas, the 43-year-old general manager.
What’s certain, say bankers, economists and analysts, is that any exit from the single European currency would create a major financial disruption.
“There would be a run on deposits and banks would only be left with transactional money,” Guillermo Nielsen, who became finance secretary in 2002, months after Argentina defaulted on $95 billion of debt, said by phone from Buenos Aires. “The result would be more income disparity, between those who have access to cash and those who don’t. It would become a third- world country.”
A euro-area exit without the support of fellow euro countries and the European Central Bank would force Greece to take direct charge of the nation’s lenders, Credit Suisse Group AG analysts say.
“There would be problems in buying oil, pharmaceuticals and certain food,” Lapavitsas said by phone. “The government would have to administer what’s imported and manage the distribution of supplies to where they’re needed most.”
(source: Bloomberg, Capital)