If Greece left the eurozone and returned to the drachma it would initially go through real hell. This assessment is not a scenario of some science fiction film nor is it created by the people who want to scare taxpayers, but it is a reality that must be seriously taken into consideration by all Greeks, politicians and citizens, and everyone must do their utmost to avoid such developments.
Shortage of goods
One of the first consequences in the case of giving up the euro would be the shortage of some basic imported goods. Fuels, medicines, foodstuffs, raw materials for industry. A direct consequence of this would be the lack of police control, which would probably cause a risk to the national security. These are just some of the consequences of such a nightmare scenario.
Given that Greece, unlike Argentina, imports almost everything, it is clear that at least for a long period of time which could last from 6 to 12 months, Greece would not be able to import anything, or to be more precise, all imports would be achieved with "blood, tears and sweat."
In this environment, reminiscent of Dante's Hell, the only winners would be those who have had money or have been operating abroad, because over night their power would increase many times.
Who would be the people to suffer the most losses? All Greek citizens and particularly those with low incomes, because they would see their purchasing power shrinking by 50% or even 70%. On the other hand, for some time they would be forced to use goods or personal belongings and property to obtain vital goods, as with the introduction of the drachma, the economy would return to exchange trading.
Emigration of, mainly young, people would also increase and there would be phenomena similar to the events in Russia and Bulgaria immediately after the fall of communism in the '90s.
Today's salary: 1,000 euro
Petrol: 588 litres
Oil: 660 litres
After the return of the drachma
Salary: 340,750 drachmas (Salaries would be exchanged according to the initial rate)
Petrol: 367 litres
Oil: 416 litres
There might be a possibility to print money, but this would not last indefinitely. Therefore there must be a primary surplus from the very first night, when the drachma is returned. Reforms must be accelerated, and they would naturally include layoffs of state employees and reduction of social benefits.
Strong demand for money would force banks to close down for some time and go under state control. Interest rates on loans would be sky rocketing and virtually no company would have access to bank credit, because with an interest rate of 30% -40% this would not be advisable.
A large number of companies would go bankrupt because they would not be able to meet their needs, neither in terms of imports of raw materials nor in repaying their loans, which would either remain in euro or would be converted into drachmas, but at a later stage when the exchange rate would already have stabilized.
Citizens would rush to withdraw their deposits from banks, but this would not be possible. Banks would close down, and perhaps the army would be mobilized to protect them. Gradually the access to bank deposits would be restored, but they would be in drachmas. There would be currency restrictions, so it would not be easy to export money abroad, even for serious needs such as treatment or studying.
Nightmarish picture of the future
When changing the currency of a country this takes time. According to estimates, but also given the experience with the euro, it would take nearly two years for drachmas to really appear. What does this mean? In the intervening period the drachma would be used in the form of accounting records, but actually the euro would be used (but the Greek banks would not grant it) and barter trade would prevail. For example one litre of oil would be swapped for a kilogram of meat.
Prices of goods and services
Inflation would be "galloping". It is believed that initially, until things normalised, it would be around 50%. Prices in the morning would not be the same as those in the evening, and that's not a metaphor.
It would take a long time until the exchange rate of the drachma and the euro stabilized. It is believed that this period would last from six months to one year. International organizations believe that the devaluation of the drachma as compared with the initial exchange rate at the time of the introduction of the euro in Greece would reach 60%, or maybe even more. That is, one euro would be traded for 550 or 600 drachmas. Others, who are even more pessimistic, expect it would reach 1,000 drachmas. (At the time of the introduction of the single currency in Greece, one euro was traded for approximately 347 drachmas).
Commercial transactions with other countries would be frozen for some time, and it is not known how long this would last. Shortage of medicines, fuel and food would be more than evident. Let us keep in mind that Greece is not a country that can satisfy its own needs, unlike Argentina, which "feeds" the whole world. No foreign company would be exporting to Greece, while the currency instability existed. Fuel and medicines would be imported with a "dropper" and this would not be done through trade but through intergovernmental agreements.
Due to the shortage of fuel, but also because of the instability and lack of institutional allies, Greece might turn out to be a bull's-eye for the neighbouring countries, and its sovereignty might be at stake -not in terms of decision making, but in terms of its territorial entirety. A country which is isolated and shaken by social unrest could become an easy target for anyone who wants to challenge its borders. There would also be a serious problem for the police because there would not be enough fuel for police cars.
The experience of Argentina suggests that at least in the major urban centres there would be groups of citizens who would try to survive using violence. Dealing with them would be at the east difficult, and perhaps the army would have to take over, whatever that would mean.
Government debt would increase by the same percentage with which the euro or the dollar would appreciate against the drachma. According to estimates, the debt could reach 200% of the GDP and therefore it would not be possible for it to be serviced. Then Greece would be forced to resort to uncontrolled bankruptcy and a huge debt cut, which in turn means that for decades it would remain outside the international markets and would not be able to borrow.
In theory the big winner would be Greek tourism, as prices in the industry would decrease significantly. Nevertheless, social turmoil and instability would be the factors that at least initially would repel foreigners wishing to visit Greece.
The second big profitable industry, again from a purely theoretical point of view, would be exports. Nevertheless, the lack of access to raw materials and the inability to finance the first few years would offset any benefit that might result from the devaluation of the drachma.