A decision two days ago by voters in a Greek governmental election not to pursue abandoning the country’s use of the Euro currency has rejuvenated the hopes of some for a stable financial economy in this and other countries.
The Euro currency was established in 1999 when 11 countries of the European Economic and Monetary Union abandoned the European Currency Unit. Euro coins and banknotes then went into circulation on Jan. 1, 2002. Today, 17 European countries use the Euro as their mode of currency.
Bill Dupor, associate professor of economics at The Ohio State University, explained to. the News that when Greece joined with other countries to share a common currency, “That was good because it made trading between countries easier using the same money; but it restricted the government in that they couldn’t increase their money supply to try to stimulate the economy.” Requirements were also set as to how high the government debt could go.
Then when a recession hit Greece in 2009, spending was not cut back, and government bonds were in danger of default, prompting belief that Greece would have to leave the Euro and revert back to its former currency, the Drachma. A bailout package was offered from other European countries which are part of the Eurozone. Austerity concessions were attached to the bailout which Greece was expected to meet, which caused frustration for many Greek citizens who thought it better for a possible return to the Drachma.
The recent election won by the New Democracy party, avoided the revert back to the Drachma, for the time being, and puts pressure on the government to implement austerity measures demanded by the International Monetary Fund, the European Central Bank and the European Union.
“Everything hinges on what happens to the world economy,” said Dupor. “If things get better, Greece will be able to meet its obligations. If things don’t improve, they’re probably going to leave the Euro.”