Historical Sketch

In the mid-15th century, the Ottoman Empire took the Greek mainland and islands from the Byzantines and kept it for almost four centuries. The Greek war of independence began in 1821 and led to the establishment of the Greek state in in1827. To stabilize the situation, the European great powers installed a Bavarian prince as king. The monarchy lasted until 1973, with a 10-years republican interlude in the 1920s. During World War II, Greece was occupied by the Axis powers. The resistance against the occupants turned into a civil war between the various partisan groups, which ultimately lasted until 1949. In 1967, a military coup installed a dictatorial regime with the king in exile, which abolished the monarchy by referendum in 1973. Democracy was restored a year later.

Monetary History Overview

During the late Ottoman period and the first Greek state, the Spanish Dollar had commonly be used as stable currency since the Ottoman monetary system had been in disarray for long time. In 1828, a currency law was passed adopting the Greek Phoenix in a bimetallic standard where silver corresponded to a sixth of a Spanish Dollar. The government, however, did not have the means to issue any specie coins, therefore the law was modified into a silver standard a year later, dropping gold coinage for the time being. In the following, only underweight silver Phoenix coins could be produced from recast Dollars, otherwise only crudely made copper subsidiary coins were issued. In 1832, the Greek kingdom was established. A year later, a new currency law reverted to the bimetallic standard. Silver coins for the 1st Greek Drachma still corresponded to a sixth of a Spanish Dollar, gold came in a weight ratio of 15½ as in many parts of Europe. The mint facilities were modernized, and the government was able to produce full-weighted specie coins and to demonetize the old and foreign coins during 1833. In 1842, the state-owned National Bank of Greece began operations and issued paper money. When the Ionian Islands merged with the Greek state in 1864, its former national bank, the British dominated Ionian Bank, also retained its privilege to issue paper money. For the next 40 years, Greece had therefore two issuing institutions, the National Bank on the mainland, and the Ionian Bank on the islands. Between 1905 and 1920, the National Bank gradually took over the entire privilege. In April 1867, Greece joined the Latin Monetary Union which had been founded two years earlier to promote a common coinage standard throughout Europe. The 1868 currency law increased coin weights by about 12% such that the 2nd Greek Drachma corresponded to the new standard. However, the implementation of the currency reform was delayed several times and dragged on until 1872. Four years afterwards, the standard had already to be suspended, and paper money became inconvertible. In 1885, a short-lived attempt at stabilization was made but the restored gold standard could be upheld for 9 months only. In 1910, a next reform attempt failed, and in the 1920s, the cash surplus was simply confiscated twice without any deeper economic reform. Banknotes were cut into two and the chipped off pieces were first declared state loans and then invalidated. In 1941, Italy occupied Greece and began circulating special paper money. It was quickly recalled, and the Greek National Bank had to redeem it at its own expenses. When Italy left the Axis powers in 1943, Germany took over occupied Greece without making any changes to the monetary situation. In late 1943, the war of liberation began which turned into a civil war after the occupants had left. In mid-1944, the economy collapsed, and the currency went into hyperinflation. The provisional government carried out a currency reform in November 1944. Twelve zeros were cut, and the 3rd Greek Drachma became the new unit. Inflation continued as the economy was devastated. Already six month later, the Drachma had to be devalued by 70%, and when a stabilization was reached in mid-1953, more than 99% of the Drachma's value was gone. In January 1954, another currency reform took place. Three zeros were cut, and the 4th Greek Drachma became the new national currency. Its peg to the US Dollar could be kept stable until the end of the fixed exchange rates. After the floating in mid-1973, the Drachma's exchange rate remained frozen for a decade. In the 1980s, the monetary policy got liberalized, and the Drachma began declining and lost about 75% of its value until the early 1990s. Stabilization was obtained when Greece began to adhere to the European currency system. It also joined the European Monetary Union in 1995 but did not meet the economic criteria to introduce the common currency together with the other members in January 1999. This was the case 18 months later, and in July 2000, Greece introduced the European Euro. The Greek banknotes and coins were withdrawn in 2002.

Greece joined the International Monetary Fund (IMF) on 27.12.1945 as a founding member.

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