If Greece decides to stop using the Euro, how would they implement it?

Question

In particular, if they decide that they want to stop using the Euro as their currency, and have their own currency, how would that work?

Since greece euros are the same as other european country's euros, how would they regulate who gets to convert their euros to greece money? And would they just arbitarily set an exchange rate? Cause if they were too generous, wouldn't everyone in Europe be wanting to convert to Greek dollars (well whatever the name of the new currency) and if they weren't generous enough, then everyone in greece would just hang on to their euros?

Would like to hear examples of this in history. Like a country that was using a shared currency, deciding to use their own currency.

Answer 1

Andrew Lilico has a likely scenario for when Greece defaults on its sovereign debt:

What happens when Greece defaults. Here are a few things:

• Every bank in Greece will instantly go insolvent.

• The Greek government will nationalise every bank in Greece.

• The Greek government will forbid withdrawals from Greek banks.

• To prevent Greek depositors from rioting on the streets, Argentina-2002-style (when the Argentinian president had to flee by helicopter from the roof of the presidential palace to evade a mob of such depositors), the Greek government will declare a curfew, perhaps even general martial law.

• Greece will redenominate all its debts into “New Drachmas” or whatever it calls the new currency (this is a classic ploy of countries defaulting)

• The New Drachma will devalue by some 30-70 per cent (probably around 50 per cent, though perhaps more), effectively defaulting 0n 50 per cent or more of all Greek euro-denominated debts.

As Megan McArdle says, there's more at the link, all depressing.

I think you're focusing too much on Greece leaving the euro and not enough on why Greece would leave the euro. Greece would leave the euro precisely so that it could pay back its debt in a new currency worth less than valuable euros. The new currency will devalue, since that's the point of leaving. Along the way the government forces its citizens to take the new currency. The money they have in Greek banks will be converted to the new currency: The citizens don't have a choice to keep their euros.