Can’t stop the rot

With the Eurozone in crisis, Greece could be the first country to ditch the Euro. James Williamson looks at how you switch currency overnight.

GREECE, IT seems, is set to give up the Euro. German politicians are fed up of bailing out a Mediterranean country they have little in common with – and ordinary Greeks are fed up of the deep austerity measures those bailouts impose.

There have been violent protests in athens, as the election of successive new governments has failed to stop the rot. Greeks are taking their cash out of bank machines and stuffing it under their mattresses. Confusion, it appears, is now the commonest currency.

Many commentators suggest Greece will ultimately cede from the Euro following another vote, in mid-june. In fact, some traders are reportedly already making preparations to start dealing the old Greek currency, the drachma, on the markets again.

But an Athens pull-out could have massive repercussions for other economies. The interconnectedness of Europe is such that Spanish and Italian banks – and governments – have billions invested in their Greek counterparts.

If Greece folds, that “contagion” looks bound to weaken other areas of our continent. Banks elsewhere already look vulnerable – and it’s feared that other countries could follow Greece into a fall.

But – practically – what would happen if the worst did come to pass?

Would Greece, or any other ceding Eurozone nation, print a new currency? Or dig out

“An Athens pull-out could have massive repercussions for other economies.”

stocks of old banknotes from before the 1999 switchover?

Summer sunseekers will be wondering about what all this might mean for their holidays and there are surely thousands of us with unchanged Euros kicking around just waiting for that next trip abroad.

Industry figures seem to agree that bringing back old drachma notes, to take the most obvious example, is a non-starter. Even if the cash is still in existence then it’s likely to be too insecure against modern forgers.

Meanwhile, firms with actual licenses to print money could be set to cash in.

Basingstoke-based De La Rue is the world’s foremost banknote supplier employing thousands of people to churn out notes for as many as 150 different currencies.

The publicity-shy printer refuses to speak to the press about the specifics of its complex operations, citing client confidentiality clauses from anxious governments.

While larger nations, like Greece, have their own money-makers, for many smaller Eurozone countries without the capability to print their own cash De La Rue look like the go-to guys.

So it’s unsurprising that all the clues suggest De La Rue is at least preparing to turn out billions of pounds-worth of new money for Europe’s smaller nations at its plants in Gateshead, Essex and Somerset “just in case”.

Announcing half-year results last November, the FTSE 250-listed firm’s chief executive Tom Cobbold said it had a “close eye” on the “pipeline of opportunities” in prospect from Europe.

It already has significant experience in three-month rush jobs – having printed new currencies for post-saddam Iraq and the new African state of South Sudan in double-quick time.

As the Eurozone has frayed over recent weeks, De La Rue’s share price has climbed. Since January 2011, the increase in value is around 50%.

In Greece, arrangements may already be in place for a new stock of drachma to be printed. There may well be crates of the crisp new notes in a top secret bank vault, just waiting to be stuffed into the cash machines if the day comes.

Whatever the scenario, there’s little wonder if the Greek government – and the governments of Europe – want to keep the facts top secret.

In the situation the continent is in, confidence is key. Telling people you’re preparing for the worst is the economic equivalent of screaming “Don’t panic!” from the rooftops. TV pictures of Greeks queuing to extract their savings from their local branches would not breed confidence in Europe and would deepen a recession that already seems set to hit pension funds, business orders and consumer spending here as well as over there.

If there is to be a lag between Greece’s prospective exit and the adoption of new banknotes, Athens may choose to overprint Euros or snip off the corners of existing notes in an effort to turn them into temporary “new drachma”.

But while Euros would undoubtedly continue to be exchanged within Greece, the crippled country would have to mount an effort to prevent unmarked notes leaving its borders – a situation which could only create yet more headaches for banks, as they run out of the liquid cash they need.

Overall, economists say, the Euro is here to stay. Experts predict the single currency will remain strong in its French and German heartland – so while its value may continue to fall, it’s going nowhere.

With the pound sitting at a five-year high against the Euro the cost of your European holiday should be lower than for some time. If you can wait, you may end up with an even better exchange rate.

But travel guidance is more circumspect. Experts warn those heading to the Med, and particularly Greece, to be careful who they book with. Make sure your firm is reputable, has a UK office and that you’re fully protected with guarantees. And they say while the exact situation and its likely impact remains as clear as mud, smart tourists should travel with cash in small denomination notes to reduce the risk of a tragedy of their own.

Picture: PA Greeks are fed up of the deep austerity measures and there have been violent protests in Athens.