If Greece left the Euro, how many Drachma to the Euro would there be?

[Dauphin]

If Greece left the Euro, and reintroduced the Drachma, then how many Drachma to the Euro would there be?

I think it's a nonsense question, but it's ended in the need for an argument to be settled.

[Zoetstofzoetje]

it would float.

[Dauphin]

Naturally. But at what initial value would assets and liabilities be converted? It is arbitrary. Could be par, or could be 2:1, 10:1 or any other ration.

[Zoetstofzoetje]

they'd make it pretty expensive initially, to devalue their debts

[Dauphin]

How would using a different ratio (e.g 1 million to 1 or 1:1) devalue their debts?

[Bugs ****ing Bunny]

The number at launch would be anyone's guess, but by 6 months after launch it should stabilise at 85 trillion drachmas to 1 euro.

[Zoetstofzoetje]

the closer they can negotiate to 1:1 initially the better. it means they can print 1 drachme per 1 euro. they would stop printing when they cover the debt. at the same time, they would devalue their currency, which is actually good for them. it means labour will become cheap, relatively.

of course, ECB would not be happy to guarantee such an exchange rate, as effectively they'd be devaluing the euro and paying off the greek debt with their own money. so this will never happen. besides, do you know how 'expensive' it is to introduce, let alone change a national currency? everything has to be changed (back)! designing/printing/distributing money is no small feat... and nobody would have any faith in it, so it would not circulate widely.

even if something like this happens, this is a frankenstein solution that is not good for them in the long run. but hey, you can't accuse the mediterranean cultures of thinking beyond today too far.

[C0ckney]

How would using a different ratio (e.g 1 million to 1 or 1:1) devalue their debts?

by re-denominating them in drachmas and then watching the new currency slide, so the 'value' of the debt relative to other currencies falls.

you have a debt of 100 euros. the day the new drachma is launched 100 drachmas = 100 euros, all debts are re-denominated, after a few months your 100 drachma debt is now worth 25 euros.

my guess. 1:1 at launch then falling rapidly, eventually becoming steady at 4/5 drachmas = 1 euro.

[Kuciwalker]

C0ckney, imagine they did exactly what you proposed, except added an extra zero to every bill they printed. What effect would that have on the flow of goods and services across Greece's borders now or ever?

[C0ckney]

when a country defaults and changes its currency, it's my understanding that outstanding (government - which is what i was talking about, sorry if that wasn't clear) debts are re-denominated in the new currency.

[Kuciwalker]

If they're going to re-denominate their debts they can do so at any ratio they please.

[C0ckney]

which, while obviously true, doesn't impact on my point in any way...

[Kuciwalker]

Yes, it shows that the new currency's ratio is a totally arbitrary choice.

[Zoetstofzoetje]

capital markets' e/valuation process will influence exchange rates, and the ratio is also dependent on circulation rates and printing speed. so it's not arbitrary

[VetLegion]

Re the OP...

I don't think they'd convert at 1:1, because it would make it too easy for population
to calculate how much poorer they are after it devalues. They'd convert at 230.75
drachmas per euro or something like that