ARTICLE DISCUSSES BANKNOTE SWITCH IF GREECE LEAVES THE EURO

Kavan Ratnatunga of Sri Lanka writes:

The Greeks would have to ensure the new banknotes were exactly the same size as the euro banknotes, however, as otherwise, every ATM would need to be recalibrated accordingly.

There are currently seven euro banknote denominations in circulation and eight coins. This is unusually high, with the global average being five different banknotes and the UK having only four. Greece needn't bother printing equivalent notes in all the denominations as a way to save on costs. It is widely accepted that to print a banknote costs about six euro cents, so cutting down on the different types of note could save considerable costs.

Denominational planning is an important consideration when introducing a new currency series. In Sri Lanka, when the decision was taken to overhaul the currency, the central bank focused on a number of factors, including ensuring the new currency was convenient for the public to use. This led to the retirement of the 10 rupee note and the introduction of a 5,000 rupee note for the first time.

In terms of the quantities to be printed, one analyst says that on average, research indicates there are between 40 and 60 banknotes per inhabitant in circulation. "But during a changeover to a new currency, you should initially print more," he says.

In terms of the time scale, there is no doubt a project of this size could not happen overnight. When South Sudan became an independent country on July 8, 2011, at midnight local time, the project to develop a new currency had secretly been underway for six months. In January 2011, more than 98% of the population had voted in favour of independence and with the date set for early July, the pressure was on the South Sudanese to design, create, print and have available a brand new, fully functioning currency by Independence Day.

British note printers De La Rue were tasked with the project, which would normally take 18 months. One of the first things the parties agreed on was a new denominational structure and to forecast the volumes required for each note. Following discussions with the Minister of Finance, it was decided that new notes would be created with values of 1, 5, 10, 25, 50 and 100 pounds. A set of three separate coin vouchers was also created (5 piasters, 10 piasters and 25 piasters) to stand in for coinage until permanent replacements could be made.

With a dedicated team of engravers and making use of manufacturing sites in Sri Lanka, Malta and Kenya, the company got the project done. The huge efforts to achieve the realisation of a relatively small currency in comparison to what Greece would need, indicates how long it might take for a new drachma to be ready for use. Work began on the Sri Lankan series, which was issued in February this year, some three and a half years earlier, for example.

To read the complete article (subscription required), see: Greek reversion to drachma easier than euro conversion, say analysts (www.centralbanking.com/central-banking/news
/2124508/greek-reversion-drachma-easier-euro-conversion-analysts)

Wayne Homren, Editor

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