Convert to the Drachma – Piece of Cake. Right…

By Louis Proyect, who has written for Sozialismus (Germany), Science and Society, New Politics, Journal of the History of Economic Thought, Organization and Environment, Cultural Logic, Dark Night Field Notes, Revolutionary History (Great Britain), New Interventions (Great Britain), Canadian Dimension, Revolution Magazine (New Zealand), Swans and Green Left Weekly (Australia). Originally published at Louis Proyect: The Unrepentant Marxist

One of the things that’s been nagging away at the back of my mind in this ongoing discussion about leaving the Eurozone is what that means in terms of following through. I think that the average person on the left who considers this to be a sine qua non for Greece moving forward has no idea of what’s involved. It is not just printing new currency and delivering it to the banks. It is also a mammoth undertaking from the IT standpoint. Think in terms of what it would take to reverse engineer something like this:

NY Times, March 9 1998
A Year Before the Millennium Bug, There’s the Euro Problem

LONDON, March 8— Amid the rush to reprogram the world’s computers so that they will function after Jan. 1, 2000, a little-known computer problem looms as large with a deadline that is even earlier.

On Jan. 1, 1999, the European Monetary Union will introduce the euro, a new currency that could have serious consequences for the computer systems of financial institutions and just about any company that deals in foreign currencies and exchange rates.

Compared with the much-publicized year 2000 problem, which can set computer clocks back to 1900 instead of recognizing 2000, the euro poses a greater number of technological problems.

Exchange-rate and tax software will need to be upgraded, financial statements redesigned, automated teller machines revamped and historical data converted — and that is just scratching the surface.

”The magnitude of the problem the euro poses is unbelievable,” said Nick Jones, research director of the Gartner Group Europe, part of the Gartner Group Inc., a technology advisory and research firm. ”In terms of cost to fix, it is comparable with the year 2000.”

The Gartner Group estimates that it will cost European corporations, many of which have operations worldwide, $150 billion to $400 billion to upgrade their systems. Add to that the expenses in fixing the millennium bug, and that cost almost doubles. Mr. Jones said the cost of fixing each line of code is estimated at $1.10, with billions of lines of code having to be changed.

As someone who worked in IT for 44 years and on some very large scale projects such as developing a completely new system from top to bottom for Goldman-Sachs, this is a huge project that would require banks and any other large-scale corporations in Greece to manage. And that does not get into the problems that the civil service would have to deal with. Pension systems, the tax system, et al would have to be reprogrammed.

I now realize that when people were demanding that Syriza conduct a two-tier operation, one that sought an end to austerity within the Eurozone, and another on a parallel track that would switch over to the drachma, they had no idea what this would entail. Frankly, I don’t think that Greece is capable of converting to the drachma today even if the government voted for it. Billions of dollars would be required to do such a conversion and the cash-starved government agencies would even have less money for such a project than private corporations.

I have heard what seems like dozens of leftists complaining about Alexis Tsipras’s failure to deliver a contingency plan. These are people who almost certainly have never sat in cubicle and programmed a financial system in COBOL as I did for twenty years before I moved over to UNIX based systems at Columbia University.

My good friend Liza Featherstone complained on Facebook this morning: “Seriously every dude is a Greece expert now. How’d you all get so smart so fast?” Boy, was she ever right.

* * * *

Journal of Information Systems, Vol. 13, No. 2, Fall 1999
pp. 105–116

The Impact of the Euro on Information Systems
Daniel E. O’Leary, University of Southern California

Accounting Information System Requirements Brought About by the Euro The introduction of the euro will have a wide range of changes in requirements for accounting information systems (e.g., Dekker [1997] and others).

1. Legacy systems will require multiple updates. Unlike present day relational database systems, many legacy systems redundantly store data items (e.g., currency figures). In these systems, all instances of each redundantly stored currency data item will need to be updated to the same euro figure.

2. Systems must do triangulation. All those systems using processes related to currency exchanges, will have to be updated to reflect changes in the way conversion is done, using triangulation, rather than traditional inversion conversion.

3. Multiple currencies. Since both euro and local currencies can be used during the transition period, systems will need to allow recording and display of both home currency and the euro for each transaction. Inventories of both currencies will need to be kept as long as both are used. The existence of multiple currencies potentially exposes a company to the risk that payments are made in the wrong amounts of a currency. For example, as in Table 3, a bill for 302,706 euros incorrectly might be paid as 4,211,213 euros if clerks use the wrong currency amount.

4. Minor payment differences. Systems will need to be changed to accommodate minor differences in payments. Since customers can pay their bills in either euros or the home country currency, triangulation rounding can create a situation where there are differences in the equivalent between what is billed and what is paid when different currencies are involved. Few systems have been built to accommodate differences in payments and what is billed. Further, few systems currently accommodate billing in one currency and payment in another (Software Echo 1997). In addition, such differences will carry forward to the general ledger, which will also have to accommodate minor differences.

5. Restatement of financial reports. Firms must restate previous financial statements in euros, which raises other questions including the following: Who determines whether historical numbers will need to be restated? How much of the historical data will be restated? Will firms have the restated historical numbers attested to?

6. Inconsistent use of decimals. In some monetary systems, e.g., Belgium and Italy, decimal places are not used. As a result, systems designed for these currencies will need to be updated to accommodate the euro’s decimal places.

7. Number of decimal places. Not only is the existence of decimal places an issue, but also the number of decimal places is an issue. In order to assure that rounding is done at the appropriate level, six decimal places are required to accommodate the euro.

8. Input validation will need to accommodate multiple currencies. Input validation will need to change to accommodate the existence of a new currency and multiple currencies. Reconciliation tests will need to allow for and accommodate differences due to rounding.

9. Internal documents. Typically, most of a firm’s documents, input, and output will need to be changed to accommodate the multiple currencies.

10. Reporting capabilities. Reporting capabilities will need to be examined closely. For example, reports are often based on currency values exceeding some “threshold” amount. In some cases firms will need to change the bases of those thresholds to accommodate the euro. In addition, reports will often need to have the ability to display two or three currencies simultaneously.

11. Currency fonts will need updating. Finally, currency fonts will need to be updated to include the new symbol for the euro. Apparently, Microsoft has announced that it will accommodate the euro symbol in its 32 bit applications, but not in legacy applications, such as Windows 3.1 (


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  1. soulofsound

    Varoufakis has written about this more than once recently. It is indeed the main obstacle to a Grexit for Greece, besides the lack of a solid industrial base.

    1. Ben Johannson

      Yes, Greece has serious supply-side problems on their hands. Otherwise a Grexit could be made in a relatively smooth manner.

  2. dla

    COBOL? Ouch! One relative advantage of a rollback to drachma is probably that it wouldn’t have to be done in that language. :)

    As a lefty who does have substantial IT knowledge I appreciate the difficulties involved which are, however, more a problem of organisation (which systems do we need to fix and where? How do we get access to them? Etc.) than of sheer coding complexity.

    1. Clive

      I agree that when you get down to the nub of a lot of changes, the actual change itself is often a fairly straightforward task to do the coding. But those “problems of organisation” as you so eloquently put it are where the pain points are.

      I can tell you that right now (as in, while I am actually typing this) I am sat on a conference call of such mind numbing tedium that I am losing the will to live and wondering if I sneak out and get a cup of coffee and a biscuit I’ll be missed that has gone on for an hour already and threatens to go on for at least another hour… while various people on the project try to decide what needs to be changed, how can it be changed, what the implications are of changing it in Method A or Method B, trying to stop people from piping up suggesting a Method C which is a complete non-starter, attempting to work out if — in a sprawling morass of legacy systems, internally hosted systems interfacing to outsourced external systems and upstream/downstream dependencies — anyone really does know how it all hangs together.

      Officially it is known as a “Design Walk Through”. The purpose of the project is to implement the most trivial of regulatory change which has a laudable aim of providing customers with better information about how to manage one of their financial products. The project was initiated in January. Some vague notion that some sort of IT change might be needed was first mooted in March. With a bit of luck, the change might get implemented this year. It feels like early next to me, based in how this call is going.

      And this certainly is not an untypical fashion for how these things unfold.

      So the organisational mobilisation, getting the necessary people up to speed, figuring out what needs to change and how it needs to be changed and so on — those things take the time. When we get to it, eventually, from what I can tell, the coding on this particular change being discussed on my team call (oh no! we’re moving on to the soggy ground of backwards compatibility requirements… the horror ! the horror ! can you get intravenous caffeine I wonder ?) will be a couple of weeks or so’s work, max.

      1. dla

        I feel your pain, good luck staying awake. :)

        I do wonder if the euro>drachma rollback wouldn’t be a bit easier than drachma>euro, since one would hope that rollback procedures would have been implemented in 2002. But I guess such hopes are often vain, as invariably it is decided that “just getting the job done” is more important than pescy things like abstraction and rollback procedures…

      2. vlade

        This is actually the crux of it. The solution IMO is in looking at whether there can be solution outside the systems.

        So, a question on you, Clive. Say I’m a greek resort operator, so moving to GRD causes all sorts of troubles as you described for my card-carrying clients.

        Can I charge them say in USD and settle into my USD FX account with some institution outside of Greece?

        1. Clive

          Yes, indeed they could. It would be de facto dollarisation. It effectively bypasses the state in commerce if it happens on a big enough scale. But it starves the state of income (from VAT, corporation tax and, if people use the same USD accounts as means of paying and receiving salaries, and turn themselves into non-doms as far as Greece is concerned, income tax too). States which do not receive some income from their populations and businesses cannot pay civil servants, healthcare workers, military personnel and so on.

          We give a handy description to such blighted unfortunate countries. In common parlance, we call them “failed states”.

          1. vlade

            You’re making an assumption (which in case of Greece is a good one though), which is that the offshore FX account is equal to evading taxes. I can have an FX account and not evade (or even avoid) taxes.

            Assuming the Greek merchant has a way of converting the USD to drachma to pay his/her tax, it is his/her decision to do so (to pay or not to pay tax). If Greeks won’t pay tax (and it does look like number one national sport from where I sit), then the state fails no matter what currency they are using.

            My point was more that the issue of card using tourists is solvable – indeed, the USD account could be at a Greek bank (should the Greek merchant believe a Greek bank.. ) for tax purposes. In your previous post you wrote “Merchants and their banks in Greece would obviously have to then legally denominate their transactions in drachma”. But it doesn’t mean they can’t charge in EUR (and change the GRD amount every day, if they wish so, but even so don’t have to, as the tax is calculated as a percent of the USD amount convered to GRD at the time of merchant/IR chosing as stipulated by law). Of course, this won’t make much difference to ATMs (which could very well reject any non-dom transaction), but it means it’s not a total disaster.

            1. Nathan Tankus

              “Assuming the Greek merchant has a way of converting the USD to drachma to pay his/her tax,”

              this just shifts the IT transition from the merchant to the foreign exchange market and the banking system itself. Additionally, the IT transition for these EPOS from being denominated in the local currency to coming from and going to American dollar bank accounts is just as difficult as the IT transition from Euros to Drachma. As Clive pointed out in his most recent piece the current set up for “multiple currencies” in EPOS really still uses the local payments system to clear the payment it just charges an insidious fee for the privilege. Those systems would have to be completely changed in this example.

              1. vlade

                I know how the multiple currency EPOS work.

                The transition to USD is by an order of a magnitude easier than Drachma, as you don’t need to set up an entirely new currency and get everyone to agree on it – the infrastructure is all there, all that needs to be done is to re-program the EPOS to use USD as base currency and link it to a USD account. How much effort that is, I don’t know, but I doubt it’s months. Hell, if I was PayPal (or any other operator), I’d offer this to all Greek customers (old and potential) free of charge – either linked to a USD account, or to an EUR account outside Greece.

                As for the FX – I’m pretty damn sure that at least initially Greek gov’t would be happy to accept taxes in USD (or EUR, for the matter).

                But the important bit here is that we changed the IT problem that is hard (becasue it involves coordination and an agreement of a large number of parties) into two separate problems. One that involves the merchant and the EPOS provider – which can be done, even though it may take time as the EPOS provider is swamped by requests..

                The other is the converting USD into GRD. That is an absolute must for the greek banking system to do – but on the other hand, it’s again not impossible or even supremely hard. As described below, JPM can set up GRD as a foreign currency pretty quick.
                It should be possible to set up SWIFT fairly quickly as well (as in weeks, not years), SWIFT is really interface. So the real stuff is how hard it is for Bank of Greece (well, it could be other banks, but it’s easier to do it once) to set up GRD nostros that properly process SWIFT messages referencing GRD. It could be very easy, it could be very messy, but no-one but few people who know the guts of BoG systems know.

                As I say, it’s not an optimal solution, it’s a hack, but it’s a hack that could keep things (=tourism) going while the world sorts out how to deal with GRD. The alternative is no payments and no tourism, so the incentive is clearly there.

                The point being, there are ways how Greece could buy time and not to do one large switch over (remember, even going EUR wasn’t one large switchover). It would be messy, it would still be very risky, but if needs must, and the other choice is not having anything..

                Of course, that doesn’t mean I’d argue that Grexit is going to be anything less than a disaster regardless.

                1. Kris

                  I keep wondering if there isn’t some way for Greece to use some sort of system like this *temporarily* while it gets everything ready for a full conversion to whatever new currency it uses. It seems like a Grexit is going to happen at some point – even the IMF is saying this will happen unless there is a haircut, so Greece needs to start working on this asap. Clive, vlad, Nathan, other NC commenters who have the expertise involved, can you see any path Greece could take that would work and avoid the extreme chaos a sudden switch would cause?

                2. Yves Smith Post author

                  I’ve worked with CIOs at very large sophisticated shops (recognized as the best on Wall Street at the time) and your claim re JPM is laughably false.

                  You cannot get ANYTHING done overnight in a big firm institution IT setting even on a business unit level. You can’t even get anything meaningful done in a month save emergency fixes.

                  The fact that you’d assert something like that calls everything else you wrote into question.

                  1. vlade

                    Sorry Yves, you’re wrong. This has nothing to do with a CIO level. CIO wouldn’t even notice.

                    Setting up a new currency in the system is BAU for just about anyone. There’s a standard process that you follow, there’s a few forms to fill, and off you go. It’s _ENTIRELY_ business configuration. You seem to have a mistaken belief that setting up a new currency is some big-deal IT task. It’s not an IT task, it’s business management task (similar to setting up a new credit line say, or setting up a subsidiary of an existing client in a known jurisdiction). Even for legacy systems it’s still usually a few days tasks at most, since even 30 years ago you had to pay in different currencies, and you had to be able to configure them.

                    It’s very emphatically NOT that every currency needs to be coded and tested and what have you.

                    It takes much much longer to get agreements (all your Product Usage Authorities, the nostro negotiations etc. etc.) to go with the new currency than to actually turn it on in the system.

                    It’s MUCH harder to set up a new payment holidays for example, because you have to go through _all_ the future flows and re-apply. That can easily be a multi-month programme (which is why everyone was so glad the Royal Wedding was announced well upfront).

                    1. Nathan Tankus

                      “Even for legacy systems it’s still usually a few days tasks at most”

                      HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA. This is the only response you deserve

        2. ScottS


          Accepting payments in a foreign reserve currency would work fine for outside-facing industries like tourism and shipping, which is what much of the Greek economy is, and solves a significant problem. I agree that exchanging (let’s say for example) dollars for new drachma would be difficult but doable for tax collection purposes until all the bank software is update.

          I imagine new drachma bonds could be issued the old fashioned way, though it may be moot if no one wants to hold them. As we’ve heard from Yves, strictly fiat currency doesn’t strictly need bond issuance anyway.

          However, outwardly-facing industries accepting foreign reserve currency doesn’t solve the problem of the Greek employers paying their employees in the interim.

          And the Greek government couldn’t issue new drachma and maintain a currency peg to the euro to smooth the transition. It would instantly be worthless compared to the euro by design.

    2. pmr9

      We can start trying to spell out what has to be done and where the problems are likely to arise. Maybe other readers with informatics expertise can contribute.

      The way to think of a Grexit is not as Greece leaving the euro, but as Greece expelling the other members of the single currency zone. The Greek parliament passes a law declaring that all existing debts, including deposits in Greek banks and taxes owed to the Greek state are denominated in drachmas rather than in euros, converted at one to one. In other words, the “ECB euro” is designated as a new foreign currency, and the Greek euro is renamed as the drachma. For drachma transactions, this doesn’t require any new programming.

      The Bank of Greece, as a eurozone central bank, will be liquidated, but its data centre for clearing euro-denominated transactions between Greek banks is taken over by a new Greek state central bank and used to clear transactions in drachmas. This occurs at the same time as the redenomination of all debts and liabilities. Again this requires no new IT infrastructure.

      It is likely that at this point the other eurozone members will declare economic war on Greece, and that Greek banks will be blocked from access to card payment systems and SWIFT authentication of inter-bank payments. As others have described on this site, these systems are extremely complex. What they do, however is very simple: they just authenticate transactions, without clearing them (which ultimately requires a central bank). It’s possible to bypass all this complexity by using digital signatures, which can be generated by a smartphone or any other portable computing device, and are less susceptible to fraud than card-based systems. The software for this already exists, but would need some work to make an easy-to-use app for authenticating payments. As Yves has noted, smartphone penetration in Greece is only 32%. However the cheapest android phones now retail for about $20, so providing everyone with a smartphone (locked down with a preinstalled digital payment app) isn’t out of the question. Maybe Greece could approach China about providing the phones as a one-off investment. The public key infrastructure (everyone generates a public/private key pair, uploads their public key to a keyserver, and the keys are signed via a web of trust) could be generated in a few days, at the same time as teaching everyone how to generate and check a digitally signed document.

      1. dla

        The public key infrastructure (everyone generates a public/private key pair, uploads their public key to a keyserver, and the keys are signed via a web of trust) could be generated in a few days, at the same time as teaching everyone how to generate and check a digitally signed document.

        I’m sorry, but have you ever tried to get non tech-savvy colleagues to use public-key encryption for something as simple as *e-mail*, for which there are reasonably good GUI tools (e.g. Enigmail for Thunderbird)? I still have nightmares about this. Not to mention keeping private keys safe, which, if they are stored on Android phones, seems pretty much impossible.

        1. pmr9

          I require colleagues and research collaborators to use public key authentication to access my server – they manage ok. Standard programs for creating public/private key pairs store the private key in encrypted form, protected by a passphrase specified by the user. The existing public key infrastructure already includes protocols for users to revoke their public keys where the private key has been compromised for instance through losing a device.

          I’m not arguing that setting up public key authentication of transactions is easy, but when national and personal survival is at stake the problems aren’t intractable.

      2. alex morfesis

        iso 4207

        the only interim it / financial adjustment would be to adopt a currency large enough to absorb the greek economy
        that is not a bric or afraid of germany for economic purposes, or is a growth country that wants to do a donald trump hair flip and remind the world they are going to be a player soon enough…

        the question is one of ego or racism in greece…

        turkish lira or israeli shekel wont work for that reason

        the south korean won maybe…the mexicans might want to remind the world they are economically bigger than russia(a back door way for usa to help)…or taiwan(with a nod and a wink from the mainland)…

        saudi arabia, uae, qatar could laugh off any german poodle barks…

        indonesia and bangladesh on the…hey look at us, we are going to be top five population wise in 15 years…

        if japans new millitarism could be quelled by being the magic country which comes to the aid of greece and helps it transition..or in this new world if electronic economic warfare, the japanese begin a slow expansion into europe
        the two year window would be tied to policy of that country…

        and those who refuse to go cashless would trade in old or imported euros and dollars…

      3. Helas22

        Smartphone penetration of 32% is for 2013. Today, even in Syria almost everyone has a smartphone, let alone Greece, where mobile coverage is excellent. And with smartphones costing $40+ everyone can afford them.

        And there is no need for complicated public key infrastructure. Greece can use a centralized blockchain (such as Ripple, or modified Litecoin, Dash). Heck, they can even use an SQL database managed by CB of Greece!

        As for EPOS, ATMS and visa debit/credit cards, there would no issues with them, since they won’t be used anymore. Greeks will use their smartphones and computers to transact via the centralized blockchain when buying groceries or paying bills. And tourists can do the same after converting cash in the airport or border. Once Greece sets up currency swaps with countries it exports to, tourists from these countries can buy Greek currency online!

        So despite all the FUD, there isn’t much of an issue with introducing a new currency. Yes, there will be short term discomfort and minor issues, but given the alternative it should be well worth it.

        1. Lambert Strether

          Pony with pom-poms

          When I hear the word “blockchain,” I reach for my pom poms….

          * * *

          I’m really having a hard time making up my mind — maybe Clive or Nathan can help me, here — whether I’d rather put academics in positions of authority, or handwaving programmers. It’s a very tough call, and as readers seem to be gradually learning, sometimes all choices are bad.

          1. Clive

            Just checked the latest stats I can find and, as of February 2014 the Greek smartphone penetration rate has rocketed to a … drum roll please … wait for it now… huge 33%

            For the life of me, I can’t work out why more Greeks aren’t rushing to buy smartphones and the cheap as chips data tariffs those caring sharing mobile operator networks practically give away. Oh, yes, sorry, I forgot, it might have something to do with the crushing austerity.

            Hmm. Academics or hand waving tech wannabes. Now that is a choice. Can I cheat a bit and ask if, and do please say if you mind and would really rather not, you could spare Donald Trump for a year or two? Couldn’t you, for Greece’s sake if not humanity’s, send him over here to Europe ? He sounds just what we need to sort everything out.

  3. vidimi

    i think this is a moot point.

    difficult or impossible, grexit will happen eventually, so preparations for it have to be made. indeed, syriza have been criminally negligent for not mobilising infrastructure towards it despite taking the country to the very precipice.

    every round of bailouts becomes politically more difficult not just for germany, but for other countries in the union. every round of bailouts comes with the extraction of yet another pound of flesh – cuts get worse and worse and more and more assets are privatised to foreigners. each round, therefore, maims greece’s economy further handicapping its ability to pay its debt – its ever-increasing debt as it needs to borrow more money – back.

    looking at this death spiral, discussing the difficulties of a grexit really does look like a moot point when the only outcomes possible for greece are that, and hoping for the better angels of the likes of schauble and dijsselbloem to come around. it’s amputation or death.

    1. Santi

      Re: your point that grexit will happen eventually. According to Frances Coppola, Mr Schauble has a master plan to eject Greece from the Euro, and they are now dramatizing it through impossible to fullfill conditions, etc.

    2. supermundane

      difficult or impossible, grexit will happen eventually, so preparations for it have to be made. indeed, syriza have been criminally negligent for not mobilising infrastructure towards it despite taking the country to the very precipice.

      This. And this ought to be the starting point of any analysis of the Greece crisis going forward. Grexit is inevitable.

      1. Larry

        I’m not convinced that it’s obvious that Greece exits the Eurozone. I have felt that it should be obvious to most countries that the monetary union is deflationary for their countries and cedes their sovereignty to technocrats in Brussels who only listen to German bankers. And yet a country like Latvia is so desperate to get in that it pegged it’s currency to the Euro and underwent massive austerity from 2008 on, as documented on Naked Capitalism by Michael Hudson and others. And join they did, in 2014. Despite looking at Greece and the other countries in the chokehold of the union. The allure of being a part of Europe is too strong, and then once you’re in, the costs of leaving are so great that it is unfathomable to me that a country like Greece will voluntarily leave.

        1. supermundane

          Well argued Larry although perhaps you’re underestimated the hardening of the Greek people’s position to the point that a majority no longer fear leaving the Eurozone? People once thought a vote for Syriza was impossible. The Greek support for the Euro cannot be assumed if conditions worsen and resentment over the punitive actions by the Eurogroup grows.

        2. rwoood

          Larry, while I don’t know whether Greece will choose to leave the Eurozone, I don’t think that the Latvia case tells us anything useful on that question.

          First, there are two levels of austerity in the EZ. One is the combination of budget deficit rules under the treaty (not always enforced), and the ECB’s tight money policy (when it’s tight). The other austerity is the bailout conditionality. Latvia could be willing to accept the first (EZ-wide) austerity, and feel that it would never experience the Greek-bailout austerity. Who knows what it would do if it ever finds itself in Greece’s position?

          Second, unlike the rest of the EZ, the Baltic states have the threat of Russia pushing them into integrations westward. For Greece, the Russia issue seems to work toward Grexit, rather than toward integration with Europe.

          1. JustAnObserver

            Of course in Latvia’s case to survive the unemployment caused by the EZ’s leech-bleeding entry process they just exported 10% of their population.

            Is it possible that the only reason the Euro/EuroZone has survived this far without mass riots in the streets is the escape valve provided by the ability to go & work anywhere in the EU – language & culture permitting, of course ?

        3. MyLessThanPrimeBeef

          I feel the Europeans are not very good at diversionary tactics.

          There should be some external threat to make everyone over there want to hold on to the Euro as much as possible, perhaps even to allow the center to get even more powerful.

  4. Andrey Subbotin

    This is a list of problems for a perfect peacetime transition. For Greece the bar is much lower – they need to get a few essential services running ASAP and then gradually fix the rest. If they started their work on IT systems two weeks ago, they would be halfway done by now. But no, they are sitting on their hands in “Tsipras said it will end tomorrow, why bother” mode, while economy falls apart.

    EU is gridlocked, and the only way out that does not require Greece to rely on mercy of hostile strangers is drachma. If sanity returns, fine, but at least they should be preparing that option.

    1. rusti

      If they started their work on IT systems two weeks ago, they would be halfway done by now.

      Do you have any evidence to offer for this incredible claim? It seems like the casual manner with which a lot of posters have casually dismissed enormous Grexit logistical challenges to be a huge deterrent to meaningful discussion. Crises do have a way of cutting through bullshit and artificial bureaucratic barriers, but that doesn’t mean that ALL of those barriers were non-issues.

      I don’t have any better plan of action to offer Greece, but it’s terribly disingenuous to sit at my desk, 2400 km from Athens, and minimize the unprecedented challenges that are inherent in this decision. It’s certainly not going to be some romantic “Now we cast-off-our-shackles” made-for-TV movie if we just wish away the problems. It seems like the options are either to try to remain a debt colony and pray for a radical (and favorable) change in geopolitics before the next bailout package is due, or plunge into the rabbit hole and find out how deep it goes. But let’s not minimize the seriousness of the latter.

      1. Andrey Subbotin

        I was speaking about “a few essential services” – basically the ability to open drachma current accounts for organizations and individuals, route payrolls to and payments between, withdraw cash, convert to/from euro. That’s maybe 10% of current banks IT systems, and likely best maintained 10%. All the rest are non-essential services – web UI, online banking, various savings accounts, mortgages, investment – that can be either frozen for a month or two without killing the economy, or work in euro only for a while.

        Frankly, drachma would probably go into hyperinflation fast, and banks would be wobbly for years so fancy drachma-denominated financial services would not be necessary for a long, long time. People would need two services, 1) get cash drachmas to buy stuff in the next few days and 2) convert drachmas to cash euros as savings for longer periods.

        I am a Russian who lived through two currency collapses and one currency switch (when Russia discarded Soviet ruble and introduced its own) – yes its a mess, a lot of things are not working, grocery stores are issuing IOUs because they do not have cash, long queues, people lose savings but eventually things sort themselves out and life goes on.

        1. Clive

          You’re making some pretty big assumptions about how the systems work. You imply that everything is nice and neatly ring fenced, account opening, ledger entries, money transmission, ATMs — all, apparently, operating in self contained little sub systems without upstream or downstream dependencies or interfaces.

          But that isn’t how it usually works. Overnight batch processing will fall over if everything it expects to be there isn’t. Ledger start-of-day will have a big sad if it can’t talk to Treasury to get the overnight balances. New-to-brand product sales system won’t offer any eligible products if it can’t get hold of credit card reference data because it was designed to cross sell and relies on getting that data at the start of the sales process.

          Have you ever actually worked on a TBTFs systems ?

          If not, although it is a bit tenuous, I do know by the vaguest of relationships (via a family member I met once at a garden party) HM Queen Elizageth II and I’m sure I could wangle an introduction. You two have so much in common. Really. I mean it. You’re both apparently the world’s foremost experts at hand waving.

          1. SoCal rhino

            This is my experience too. I’ve worked in IT for a couple of TBTF institutions. My experience is the same. It is impossible to assess the scope of challenge of even seemingly trivial changes without an deep dive into the details “under the hood”. As someone mentioned, the gurus who have worked on constellations of systems for 30 years often don’t know how many features work at this point. A standalone system can be challenging. If multiple systems are affected it’s way more daunting and if those systems cross boundaries even in the same org, much more challenging yet. I’ve had my share of practice explaining to executives the reason why a simple change could take person-years of effort to analyze, code, debug, test in an environment with other applications, and then implement. For big projects I suspect that 50 per cent estimate of success is optimistic if delivery on time and budget are criteria.

    2. YankeeFrank

      You seriously think it would only take 4 weeks to reprogram their systems to the drachma? You’re dreaming.

      That said, its apparent they’re going to have to do it sometime in the next couple of years so they might as well start organizing the effort now.

      1. hunkerdown

        4 weeks is perfectly reasonable.

        For a proof-of-concept running on Amazon EC2 that communicates over the open Internet and converts to and from mock Euros.

        I don’t expect any interbank telecommunications network or clearing house being so eager to certify, talk to or hear from any code developed in such an expedient fashion, though.

        1. Vatch

          How many banks, wholesale suppliers, retail vendors, and government agencies interact with the EC2 system?

          1. hunkerdown

            Nothing wrong with EC2, other than Amazon’s record against political pressure. My point is that four weeks of work would not, could not deliver a production-ready system.

    3. fajensen

      When we did the visualization of the AXE 301 for Ericsson, we had about the same amount of testers as we had developers (25+), we had to buy a huge SUN blade-server to do the nightly OS-builds and thousands of regression tests of the complete OS (a hacked SUSE Linux), the applications, application management, the most important component being a VM running all the old legacy code inside a simulation of the old AXE 301 hardware – we basically “black-boxed” the old 1980’s kit+code and wrapped another layer around it to extent the lifetime and the capabilities of the legacy equipment.

      *If* the banks had a similar infrastructure in-house and didn’t outsource everything like was really popular in the naughties, then a conversion to “new-drachma” would not be so hard, technically – it would still take effort, determination and planning, and they should probably have started working on it about 6-8 moths ago (meaning that the planning- & “talking to people-” part started at least 12 months ago).

  5. Tim


    The Euro conversion involved a new currency and most of Europe at the same time.

    The conversion back to Drachma will involve reusing an existing although dormant currency code.

    I think the concern is valid, but maybe one should analyse the split up of Czechoslovakia into the Koruna and Euro so we can get some “hard” data?

    I still recall all the scaremongering about year 2000 and the start of the Euro. Both actually went without a hitch, which is not to say that doing a currency switch without proper planning i.e. the Syriza way is bound to fail in a spectacular way, but they could have have had a war room of 20 people in the basement of the Finance Ministry and Central Bank planning this for the last 5 months, I still have not recovered from the chock of how one can conduct the kind of brinkmanship the Greeks have without any fall back plan – can one now really believe that they would be capable of designing and implementing complicated reforms to change the Greek society??

    1. MaroonBulldog

      The Year 2000 went off without a hitch at the company I worked for, too. We started working on it early in 1996. Four years: That’s how much time it takes to get some of these things to a state where they went off without a hitch.

      I never was an IT professional. I was a lawyer who negotiated software development and systems integration contracts for the IP department, and who managed dispute resolution when there were failures. I never worked for a financial institution either, just in telecommunications. There were plenty of failures, plenty of disputes, plenty of work for such a lawyer to do.

      Clive, Lambert, Nathan Tankus, Yves, all describe a set of issues and constraints that sound entirely familiar and correct to me, based on my experience. But, as I said, I’m just a lawyer, not an IT professional.

  6. troutcor

    Kind of funny using a currency transition which went pretty smoothly to tell us about how impossible it is to do!
    Hindsight is, it turns out, something less than 20-20.
    Other commentators are right: Grexit is going to happen eventually one way or another. Might as well prepare for it now.
    Yes, it is not a simple matter. But what is the alternative: To keep the cadaver on life support because re-programming computers is too much work?

    1. Yves Smith Post author

      1. It took ten years of planning and three years of execution for the euro launch to go smoothly.

      2. Badly planned and executed IT projects cannot be fixed. They generally have to be terminated. The failure rate of large IT projects is over 50%.

      3. The performance standards for payments systems are extremely high. This is mission critical levels of accuracy and uptime. If you get it wrong, you are out of business very quickly. And from a national perspective, payments systems that are not up to scratch are not permitted to connect to the international “grid”. The Vatican is a noteworthy example.

      4. As we have explained at considerable length in earlier posts, getting the drachma working from an IT standpoint does not just involve Greece doing its part, which is considerable, but lots of other independent parties doing their part, such as participants in the fragmented credit/debit card business.

      5. Tell me how Greece survives if it has to carry on as it does now, with effectively no payments system. Importers can’t pay for imports unless they truck cash to the border, dump it into foreign banks, and then wire it to importers, or alternatively, bring it to the premises of their foreign suppliers (and some literally are doing that now). And what happens when they run out of cash on hand, as in euros? Plus even if Greece gets drachma into circulation, which is a twelve to eighteen month project (it’s not just the printing, the physical distribution, as in getting it into ATMs, is a huge task, and you also have to have the coding done to support that), foreign suppliers will want euros, so you’ll also have foreign exchange risk. Greece is not self sufficient in food and supplies will start getting tight as of the end of July.

        1. bindlestiff

          If the point is to convert the Greek economy to the level of, say, the Dominican Republic, would that make a currency transition easier? There are other ways of getting food and pharmaceuticals besides paying for them; begging for them, for instance.

      1. James O'Keefe

        Having worked on one Euro transition software project for a medium sized financial information company, it wasn’t extremely difficult. I agree that this transition will take time and be hard, but it is clear by now that Greece is facing 20 years of depression if it stays in the Euro. The transition will be painful and they will have to iterate through it, but at least they will have a future free of the ECB, its efforts to kill Greece’s banking system and a group of creditors who are willing to sacrifice Greeks to penury. They should have started sooner, but better late than never.

        1. Louis Proyect

          There is nothing difficult about it at all. The issue is finding program code in billions of lines of code to make the proper change. After I left Goldman, I finally ended up at Columbia University, which had a pretty good IT infrastructure for a nonprofit. We spent a year analyzing Y2K conversion tasks and then a year testing it. And all that was involved for the most part was looking for program code that was in an mm/dd/yy format and modifying to mm/dd/yyyy.

          1. vlade

            Not even apples and oranges. More like apples and rocks – entirely different kind.

            If greek banks have systems so old (i.e. anything over say 20 years old which they could well have) that it has hardcoded currency, it’s GRD. If it doesn’t then it has a system that either ignores currency (intrabank payment system doesn’t need currency code, it’s superfluous information, you don’t settle domestically in a non-domestic currency, you settle into your non-dom nostro, usually via SWIFT), or it can take currency as a parameter.

            Moreover, while it’s simple for the system to mis-interpret and act 1/1/1 as 1/1/1901 or 1/1/2001, it payment system is a ledger. Technically, even with hard-coded currency being EUR or (gold coins or XYZ), it doesn’t matter as long as all users agree what does the number mean. It’s not beyond the realm of imagination that the system looks like it’s settling in EUR, when it’s really settling in GRD.

            When it _can_ break things down is when you start moving outside of your internal domestic system, and there say try to pretend that EUR:GRD is 1:1. The other problem you can run into is very unlikely in this case, stuff like trying to settle too many/few decimal places for the currency etc. But hey, since you can’t move anything outside the system due to the capital controls (which are easiest to do by simply disconnecting your systems from SWIFT), who cares?

      2. steelhead23

        Thank you so much for spelling this out. Assuming conversion to drachma would cost hundreds of billions of dollars (from where?) and take 12 to 18 months (if they’re lucky), how would the Greek economy and its people survive? It would seem they would need a sugar-daddy and continued use of the euro – requiring access to the ECB’s lending facilities to do so in a reasonably orderly fashion. And of course, the Troika seems dead-set against facilitating a Grexit, so it would seem they hold all the aces. But the other reality is that Greece cannot repay all of its debts even if it adopts all of the austerity measures the Troika demands.

        The other side to this coin is that it would not just be Greek institutions that would be harmed. Banks throughout the Eurozone would be wounded, perhaps mortally, were Greece to default on all of its “odious” debt. If this were a game of cards, with a modest pot on the table, I’d encourage Greece to play the Grexit card, default, and see where the cards land. But the stakes are human lives and a nation’s future. It would take ice in the blood to play the Grexit card now. Very sad.

  7. lolcar

    The eleven points above deal with designing EU-wide information systems that DON’T break when dealing with the different currencies and numbering conventions of EU countries. That work has already been done. Presumably that’s what Greece uses now. It seems odd to suggest that systems designed to deal with euros, zloties, forints etc. are going to need a massive investment in programming resources to deal with drachma.

    Pension systems, the tax system, et al would have to be reprogrammed.

    Why ? Are we imagining introducing the new drachma at a parity of a trillion to one. Automatic out of bounds error. Perhaps an entirely new punctuation convention – 10*000 for 10,000 – just because. Otherwise, I don’t get it.

    1. Louis Proyect

      What a cavalier attitude toward an enormous task. Greek software now produces a euro sign when issuing a check. That code must be replaced to generate a drachma sign. The assumption that the software is so modularized that it can be retooled in a month or so is only possible in the comments thread on a website.

      1. supermundane

        Surely that software in addition to producing a € sign can also produce a $ sign, which is a symbol employed by numerous countries around the world seemingly without and problems. Designate the $ sign for the new currency.

        1. Yves Smith Post author

          You’ve just revealed that you have no business opining on this topic.

          This is not a chat board. Please read our site Policies before commenting again.

          1. supermundane


            I ‘opine’ very seldom on this board and leave the technicalities to those with greater expertise. Perhaps I ought to have phrased it as a question as intended or are such questions out of bounds also? I confess that I’m not familiar with the software so perhaps I ought to have declared that openly before posing the query.

            If you expect all commentators to be across all matters equally to the same level of expertise then you’ll find yourself with a greatly diminished readership Yves.

            1. Nathan Tankus

              We’ve written at length in many places about the IT issues involved. expecting us to repeat all of this- made in multiple articles and many comments- while not putting any effort into looking for any of that work is insulting. This is not a chat board.

            2. supermundane

              I intended it only as a question. It may have been a stupid question but I was, in an admittedly badly worded comment merely seeking to understand why the lack of a drachma symbol would be pose such a problem. That is, why it couldn’t be supplanted with another in short order and without the need to implement new code?

              So I do apologise. However I will say that if I’m essentially expected to have read all the material that you have read, be over the minutiae of a given subject (including it seems coding) to the same level of fidelity that you claim to have and arrived at the same conclusion as you have then why would I have any need for NC?

              I will here on refrain from commenting here on in. NC is undoubtedly a great resource and I do respect and admire the work and effort that you and others invest into it. Nothing malicious was intended by my comment however I’ll reserve comment for other sites where more latitude is granted for those genuinely attempting to grasp the many complexities of this crisis. In doing so I don’t claim to have any right to be heard nor even anything worthwhile to say by virtue of merely commenting. I’m just curious and more than a little outraged at what is transpiring in this world.

              1. flora

                You have not been insulted by our hostess. You have been challenged think deeper and more carefully.

                “Sit down and read. Educate yourself for the coming conflicts.”
                Mary Harris Jones

                1. supermundane

                  You have been challenged think deeper and more carefully.

                  A huge assumption about me implied in that statement. Querying the nature of something that is thoroughly tangential and incidental to the crisis that I’d not considered, that is how the software poses an impediment to the reversion to a sovereign currency is not thinking deeper and more carefully in your books? Who are you to assume that I’ve not through deeply and carefully about this crisis simply about I posed a query about the nature of the software?

                  Nathan Tankus, I assumed no such thing and I regularly search and read past posts.

                  I appreciated alex morfesis’ interesting comment.

                  No further comments from me but I couldn’t leave without responding to this.

                  1. Nathan Tankus

                    We’ve been writing about the IT issues for weeks. if you really think that our time is worth less than yours and searching the website for recent articles or comments about IT issues is an incredibly unreasonable demand then I don’t have any sympathy for you. We’ve done work and I don’t see why we should redo it for you.

              2. alex morfesis

                iso 4207…cuba is the only country with dual currency tracking within the system…meaning two code numbers…not really working too well for them…

                coding was easier when the world was not http with all its unix security holes that can not be fixed…without super layers of work…

                there is no hiding on an open platform like the internet…the system would be easier if the world went back to a closed loop system…but bean counters have convinced the world vpn is worth the risks vs savings…

                pencil, paper and matches are the only “secure” communication system…

              3. Lambert Strether

                “Essentially expected to have read all the material.”

                Match for that straw?

                Not to pile on, but there are two better ways to add value for other readers than typing some sentences and pressing submit.

                1) Get a working familiarity with the issues (which is not the same as having read “all the material”; NC has published an immense amount of detailed material on this topic, but we’re not sadists. Really.

                2) Then opine.

                2) Or: Think about a question you want answered — preferably not one you’ve seen asked a bazillion times before — and then ask it. The comma and currency sign questions mean you haven’t done step 1, which is why you’re getting pushback. (Just as a troll prophylactic, I don’t mean rhetorical questions, like “Why are you harshing the mellow?”)

            3. Yves Smith Post author

              I have cited Michael Schrage (technology expert and long-standing colleague) who states that businesses need to fire 15% of their customers because they are too high maintenance. The underlying problem is either that they are cheap and unduly demanding, or they want the service provider to be something other than it is, which leads them to be abusive. The business is much better served getting rid of those that make undue demands on its resources and finding better customers.

              Or as Barry Ritholtz says, “Embrace the churn.”

              This is not a chat board. You seem to want to treat it as a chat board. If that is true, you are in that 15%.

      2. flora

        cavalier attitude toward an enormous task

        Yes. Indeed. The ‘how hard can it be’ crowd are clearly unfamiliar with large, complex systems and legacy code integration. They look at this bit or that bit (no pun intended)in isolation and conclude it can’t be hard to change. That’s a childlike view.

        1. lolcar

          Bit of a straw man argument here. I don’t take the childlike view that its easy to get every piece of software in the land to start printing out drachma signs in place of euro signs. I ask why do you need every piece of financial software to be able to print out drachma signs. If returning to the drachma means that every Greek has to carry around a stamp pad and a little Dpx stamp for the next couple of years – then so be it.

          1. hunkerdown

            Output formatting is a two-bit change, in any sense. s/\\u20ac/\\u20af/g (s/€/₯/g) and Solon’s your uncle on that score.

            Ceremony is an important aspect of trust in such as banking. You need almost every piece of financial software — not necessarily business software, granted — to understand the difference between Euros and drachmas. Without autarky, which isn’t remotely in the cards here, dealing with the outside world is unavoidable, which implies dealing in and with both Euro-“eurounits” and drachma-“eurounits”, with all the external integration that entails.

            1. Louis Proyect

              Output formatting is a two-bit change, in any sense. s/\\u20ac/\\u20af/g (s/€/₯/g) and Solon’s your uncle on that score.

              Sigh. Why is so hard for people to get it. The change is simple. What is devilishly difficult is tracking down all the places where it must be made.

              1. Lambert Strether

                Why? Because we are dealing with programmers, and to programmers, all that matters is my program in my cube. Social relations!

                Pace Donald Knuth et al., but that’s not who we’re dealing with here.

              2. hunkerdown

                Louis, I apologize for not expressing myself more clearly.

                lolcar suggested a hack that I read as “all of Greece just pretend €1 = ₯1 and change the labels”. I suggested it’s easy to achieve the same effect in code with less matter and probably less human effort by hacking the front-end, but that either way the end result would be confusion (i.e. catastrophe) in the event those drachma-tagged-as-euros hit the network undistinguished from €euros, which I figure would eventually happen one way or another in the due course of business.

                See also: the Mars Climate Orbiter, for what happens when one doesn’t keep one’s units straight.

            2. lolcar

              Financial institutions’ software is definitely expandable. The range of currencies that a bank can deal in / offer accounts in is not hardwired into their system. Some of the other commenters have explained how that is done (ISO codes / SPRINT etc.) And multinational banks – including the Greek ones obviously have the institutional capacity to do that. On the other hand, legacy government software which, for example, generates a tax return form, or cuts a check will be different. You’d need source code and a recompile to change Euro to Drachma. I don’t think its a fundamentally difficult task. Global search and replace on \u20ac if you’re lucky. That’s where the analogy to Y2K falls down. There you were dealing with programs that took the date and time as a parameter to their normal operation and you couldn’t guarantee that they’d continue operating properly when that parameter broke. Greek programs ARE going to continue to add 2 and 2 to get 4 – even if without the source code you can’t change them to say “Enter your yearly income in drachmas ?” Is that a problem ? I don’t think this kind of software formally needs to deal with the outside world or in multiple currencies. If the Greek government didn’t have the institutional capacity to reprogram – perhaps they don’t have the source code – I’d just continue using the form and stamp new instructions on the front.

              1. Louis Proyect

                The range of currencies that a bank can deal in / offer accounts in is not hardwired into their system.

                What do you mean that the euro is not hardwired into their system? Have you worked for banks? I have: Chase Manhattan, Goldman-Sachs, Irving Trust, Salomon Brothers, United Missouri Bank, and Texas Commerce Bank. You think that there are no subroutines that are “hardwired”? You haven’t been around the programmers I’ve worked with for the past 44 years. For example, there might be tests to see if a customer has sufficient funds to be qualified for a mortgage. A program might conceivably mark it as eligible if there were 10,000 euros in the account. Switching to a drachma might make everybody eligible–not that there’s anything wrong with that obviously–but you can see that this is not a simple matter. Just being able to handle a drachma instead of a euro does not mean that software is meeting expectations. You have to do a BUSINESS analysis, which is the first stage in any systems implementation. You and other people here who have worked with computers are only seeing the technical side, which is completely inadequate.

              2. Lambert Strether

                More handwaving. Sick of “I don’t think” and “I don’t believe” from people who won’t listen to those who actually build such systems for a living.

    2. lolcar

      The Greek drachma was represented by Dr or Drx written in the Greek alphabet. Its highly unlikely that any financial software now in use has the ability to produce such a sign. But, who cares ? Why does this present a problem that has to be immediately fixed ? If the Greek government still mails out tax refunds and the like in the form of checks and their software only has the capability to print a euro sign – what is the objection to stamping “payable only in drachma” over the top ?
      Taking another example – if you insist on reintroducing a new drachma at 10,000 to the Euro, you’ve probably broken every ATM in the country. They’re unlikely to be easily programmed to handle non-Euro denominations. If on the other hand you introduce the drachma 1:1 and are willing to accept that the machine still asks “How many Euros do you wish to withdraw ?” perhaps thats good enough in the short-term. Is that cavalier or merely practical ?

      1. Troutwaxer

        The Drachma sign itself is a sideshow. Those of us who program probably understand that the Drachma symbol is available in UTF-8 or some form of unicode. (I’m not going to dig for it now, but Drachma symbols ARE NOT THE PROBLEM.)

        The scope of the problem is more like this. Imagine that you need to make a change to the canon of Western Literature, such that your brand-new metaphor makes sense to everyone who needs it. The “source code” for Western Literature goes back to ancient Greece, (and maybe even Sumeria) such that Shakespeare was making references to documents written thousands of years before his time, originally in ancient versions of Greek or Latin.

        In order to make your “small change” to the canon of Western Literature, you need to rewrite every book, every scroll, every stone slab ever created to contain pointers to the metaphor you wish to create, and you need to do it perfectly and transparently. You need the cooperation of every literary figure from Homer to Bob Dylan, and of every publisher and librarian from Random House to the elementary school on the corner.

        Is it doable? Of course, but we’re talking millions of person-hours.

        Back in the real world, the one, single tiny problem of “under which circumstances your new code should produce the Drachma symbol as opposed to the Euro symbol” is gigantic, and probably requires hundreds of hours of meetings merely to produce a requirements document.

        To make matters worse, I’m guessing that the Eurocrats will do everything possible to make sure the source code is not available.

        The only possibility I can see is for the Greeks to start an open-source program to build a banking system, and they’re six months too late. (Actually, more like six years too late, but Tsipras wasn’t there six years ago.)

        1. papicek

          Those millions of person-hours are however, spread across many separate software companies. This isn’t systems software. It’s application & presentation level stuff. Yes, I know that’s OSI network model terminology but the principle holds nonetheless. I’ve maintained old code too. I still update my own code, too. If all these systems haven’t been modularized, then lots of coders need to think about taking up stand-up comedy.

        2. lolcar

          In order to make your “small change” to the canon of Western Literature, you need to rewrite every book, every scroll, every stone slab ever created to contain pointers to the metaphor you wish to create

          Come on. This is a pretty strained metaphor. Sure if I go back in time and distract Julius Caesar just as he’s about to say “Veni, vidi, vici” the resultant changes to Western classical and popular literature would be incalculable, and the amount of work almost infinite if you had to go and manually find, remove and rewrite every subsequent reference. That’s like a 10 to a googleplex times more difficult task than what we’re talking about.

          “under which circumstances your new code should produce the Drachma symbol as opposed to the Euro symbol” is gigantic, and probably requires hundreds of hours of meetings merely to produce a requirements document.

          If you’re going to define Kafkaesque bureaucracy as a requirement for any and all action then by definition everything is impossible. If Greek government systems are running proprietary EU software for tax collection etc. and the Eurocrats refuse to release the source code or demand months of exploratory meetings as a prelude to action then the Greek government is just going to have to kludge it with the old software in the short-term. If that means using forms that still have Euro signs printed on them, I don’t see the problem.

          1. Lambert Strether

            Yeah, systems programming sure is hard work, isn’t it? Gad. Match for the straw on “Kafkaesque bureaucracy”?

            Idea: Let’s rewrite the entire Greek payments system in node.js!

            1. Troutwaxer

              I was thinking MUMPS, or maybe TCL. (For those of you not in the know, TCL stands for “Tool Control Language,” and there are lots of tools who need to be brought under control in order to resolve the Greek crisis.)

          2. hunkerdown

            Systems designed to store and transfer money tend to be designed to leave nothing but nothing to chance, which is why they run even as well as they do at scale. Per Conway’s Law, such systems were produced by IT organizations that likewise leave nothing to chance, which means Kafkaesque bureaucracies (since the code implementing that system consists of many owners, many moving parts and many, many copies possibly requiring physical access to update), with Kafkaesque process documentation to match.

            Multiply that by that everyone the world over that is, or would be, transacting with Greek institutions in any fashion risks rather expensive trouble should anything Greece might send or receive on SWIFT or whatever be ill-formed or unexpected.

            Even if everyone just pretends € === ₯ for a while and keeps the milk euros strictly separate from the fish euros — and think of the fraud potential in receipts issued with that € for many times the actual euro value — when it comes time to replace the chewing gum with something solid, sturdy and production-worthy, the process will involve Kafka, Samsa and everyone else being on the same page, because the international payments system truly is too big to soft fail.

  8. Jesper

    One major assumption is that everything has to be re-denominated to the new currency. Is that assumption correct?

    & some of the points seem to assume that modern accounting packages have difficulties with handling multiple currencies. Then again it might be stupid of me to assume that modern accounting packages are being used by businesses in Greece.
    Quite a few problems seems to be pointed toward exchange rates, now, lets assume that the vendor offers really really bad exchange rates then the problem with exchange rates is suddenly minor and the problem is then instead the handling of multiple currencies. Again, handling multiple currencies in a modern accounting package isn’t that complicated.

    As I see it, the two big problems are the back-end in payment processing and the reluctance of people in Greece to use credit/debit cards. If they could be convinced of the benefits of credit/debit cards, but that would mean that VAT would be collected, then the logistical nightmare of handling the introduction of new coins and bills would again be mitigated.

    1. Clive

      The back end legacy systems in virtually all of the TBTFs are running — in some parts, not all certainly, but there are some modules — stuff that is 30+ years old. The other day I was at the ATM, it was in a group of 4 and one of them had crashed. There it sat, its technical misery laid bare for all to see, proudly displaying its Windows XP logon screen. Windows XP for cryin’ out loud. In an ATM. Goodness knows when it was last security patched.

      You’d be shocked at just what goes on in the data centres of some of the largest, most critical banks. Never, for one single second, assume that it is either a) even vaguely modern or, perhaps more worryingly b) there is anyone in the owning organisation who really knows how it actually works.

      The Greek banks could hardly have been drowning in systems investment budget in the past 5 to 10 years. I shudder to think what they are like under the hood.

      1. John Hartley

        To assumption that it will necessarily be long term pain to add a new currency assiumes that everything is hard coded, that there are not quick cludges and that an existing exchnage rate module will not have extensibility. Now these things will come intopla as an extent but they will not exist in all cases in all of the time. To suggest that this necessarily a major obstance to drachma reintroduction is false.

        As to XP in ATMs – yes it is widely used but they will not be hacked as they are not on an open network and work as dumb terminals, so t is not a huge risk.

        1. Yves Smith Post author

          The fact that you are assuming when you know nothing about this topic means you should stop speculating. If you persist in making arguments on matters that have already been addressed in the post proper or by other commentors, you will be put into moderation or banned. This site is not a chat board. Commenting is a privilege, not a right. We do not tolerate bad faith argumentation. I strongly advise you to read our Policies section before commenting again.

        2. Clive

          If an ATM is running an operating system (like WinXP) it is, by definition, *not* a dumb terminal. Even my mother-in-law’s cat could have worked that one out. What is this, amateur night ? ATMs do not generally reside in the owning bank’s premises (some do but the majority are RATMs (remote ATMs)). The one I referred to above was at a station. That’s why it was running an OS — to get the TCP\IP stack, Ethernet protocol and all the other bits and pieces it needs.

          They are, then, unavoidably using a public network as the backhaul to the owning bank’s data centre. So they do (or should be, you’d think) reasonable protected against known vulnerabilities.

          I would not advise you to consider pursuing a career in enterprise architecture or as an IT security consultant based on the levels of “knowledge” you’ve just let us all have the benefit of.

            1. Clive

              Yes, you’re right of course Lambert. It takes until at least Service Pack 4 for the dumbness to wear off even a little. And then only from Spiro Agnew to Joe Biden levels of ineptness.

      2. vlade

        If the systems are 15 year old, then they probably still have the bits of when GRD was fixed to EUR, from just-before-EURization. Whether it makes any difference is, well, a different matter.

      3. guest

        Windows XP for cryin’ out loud. In an ATM. Goodness knows when it was last security patched.

        It is probably a version of Windows Embedded POS, which is indeed an XP variant, and provided by Microsoft specifically for machines like ATM. In this case, depending on the version, it is supported by Microsoft (and hence security-patched) till 2016 or 2019.

        1. Clive

          Could’ve been (Microsoft say Windows XP Embedded (Toolkit and Runtime), all versions Support runs out on January 12, 2016 from what I can tell here but even then MS will still do custom work if you pay them enough)

          I was nosey and looked over the stricken ATM quite closely and even had a play about with the keypad to see how messed up it was, it wasn’t obviously hackable, luckily for the ATM operator ! Didn’t shout at me that it was Embedded though, looked just like XP Workstation on the login (wish I’d taken a photo of it now).

          Anyhow, the point in relation to the original comment was, it was based on at least 10 year old code.

      4. flora

        here is anyone in the owning organisation who really knows how it actually works.

        Yes. People would be amazed that these large old legacy systems can closely resemble a Rube Goldberg Machine. Yes, it works. Yes, input A results in a correct output B. But how you get from A to B can be mind-bogglingly complex and convoluted.

    2. lolcar

      The obvious thing to do when introducing a new currency is to do so at parity – precisely in order to avoid having to re-denominate.

  9. Steve

    When I called on GM back in the stone age, we had a saying that I think fits within this topic:

    It take 3 years to get approval testing passed at GM….. Unless they NEED them… in which case it takes 2 weeks….

    Or put another way….. Necessity is an incredible motivator….

    1. Clive

      Greece, internally, could be like GM in your heartwarming tale. But Greece’s financial system needs to interact with the Rest of the World. It can’t just function in isolation. Why would JPM, Deutche Bank, Barclays, MasterCard, the Bank of England, PayPal (just of the top of my head, there are hundreds more) etc. etc. etc. put the integrity and reliability of their systems in jeopardy ? These institutions are not exactly known for their charitable outlooks.

      1. Andrey Subbotin

        I do not think the rest of the world would have to accept drachma transactions anytime soon. Presumable drachma would at first circulate only inside Greece, and to send money to Deutsche Bank you have to convert it to euros. So yes, Greece can introduce drachma in isolation

      2. Larry

        I would presume these institutions would want to bank with Greece for a host of reasons. Even with a devalued currency, there are oligarchs who require financial services to run their businesses (shipping magnates come to mind) and purchase property etc. And while it may be in shock for a brief period of time, presumably Greece will still remain a popular tourist destination. Tourists will want to use their Visa card and withdraw money in a local currency. Maybe I’m wrong, and I can’t think of any historical examples similar to this where the project was successful. The only close example I can think of is Argentina, but it’s not the same situation as has been pointed out many times.

        1. Clive

          That non-Greek banks would certainly “like” to transact with Greek ones in the event of Greece exiting from the euro is not in doubt.

          But wanting something isn’t the same thing as being able to achieve it. And if there was a risk/reward trade off to be calculated, the other financial institutions would not gamble with the reliability of their systems merely to achieve some quickie accommodation of the reintroduced drachma. Why would they ? What’s in it for them ?

          And any oligarch worthy of the title will have got their misbegotten wealth out of any Greek banking exposure years ago. It won’t be anything other than the most minor inconvenience to them if Greek banks get taken out to the woodshed.

          1. vlade

            Err, I’m sorry, but I don’t see where you’re coming from. If Greece introduce drachma, (say) JPM has two options. Not to deal with it, or deal with it.
            If it doesn’t want to deal with it, issue closed.

            If it wants to deal with it, it engages the same process as with any other currency it wants to deal with but doesn’t at the moment (likely for JMP limited to KPW if that, but humour me), which is setting up parameters in the system (currency code, nostros, curves, fx pairs, sources of data and what have you). GRD then either can be SWIFTed, in which case hurrah and nothing else is needed (and strictly speaking, given that SWIFT is just a message protocol that has its own means of adding or removing a currency, see IRR as an example, it’s the same story).

            Where does the reliability of their systems come into this?

            1. vlade

              Or it can’t be SWIFTed. On the top of my head, I can think only of KPW and IRR as currencies that can’t be SWIFTed… In which case, JPM could still in theory deal as “non-deliverable”, much use it would be to any retail clients of course..

              Either way, unless Greek banks start sending badly formatted/filled SWIFT messages to JPM, their internal mess (or lack of) has no impact on JPM in the scheme of straight payment things.

            2. Clive

              You’re right vlade, it isn’t a technical i possibility at all to make the system changes. It can be done and it has been done before. The outline description of the change itself is pretty much as you describe.

              The issue is when people start making unsubstantiated claims that it is “quick” or “easy” to do. It is neither of those things if the change it to be introduced reliably. And one party cannot simply implement the change unilaterally. It requires cooperation between the various participants and an agreed standard to abide by. These are not in place yet. Even in the ISO currency code, you’ve ended up making an assumption that it would automatically be GRD. Some participants in the global payments systems would not want GRD resurrected because it would cause issues with historic data (how could you tell the difference between “old” GRDs and “new” GRDs ?) So they’d be lobbying for a new, different ISO currency code. They might end up losing that argument. But the argument would have to happen and reach a majority settlement. That’s before a single line of code gets changed.

              1. vlade

                In my experience, process of introducing a new currency in a major bank can take anywhere from two days (established currency, only for client FX transactions) to a few months (if the whole curve and stuff needs to be done).

                On the GRD vs. new ISO code front, I believe that the Czechoslovak experience can be called on, which was a pretty swift. That said, if people have old GRD in the system (which hasn’t been used for >10years now, so likely sitting somewhere on a backup tape), I’m not sure how violently they would complain on resurrecting GRD. Actually, thinking about it Goldman may, since their swaps may still be extant and could possibly be (technically) denominated in GRD with a fixed exchange rate to EUR (304.75 or whatever it was at the time).

                1. Lambert Strether

                  I need to shovel out the comment that prompted this and respond to it, but for Greece to get a new currency code, Greece’s national bank has to request it from the ISO standards maintainers. And since Greece’s national bank is in reality a branch office of the ECB…

                  A sudden feeling of relief stole over the major. ‘Captain, you know what this is now?’

                  ‘I’m sure you’ll tell me, sir.’

                  ‘I will, Tom, I will. This is political, Tom. We’re soldiers. Political goes higher up.’

                  ‘You’re right, sir. Well done, sir!’ –Terry Pratchett, Night Watch

      3. lolcar

        I’ve used a Western bankcard to withdraw cash, book tickets etc. in off-the-beaten track towns in any number of countries with extremely dodgy governments – Burma, Cambodia, Indonesia, Peru, Paraguay, Serbia. If you’re saying that Greece is going to get the full Cuba treatment if it defies the EU powers, definitely possible. But if that happens it’ll have nothing to do with Western financial institutions having technical difficulties dealing with Greek systems.

        1. Nathan Tankus

          ” But if that happens it’ll have nothing to do with Western financial institutions having technical difficulties dealing with Greek systems.”

          nope, you’re completely wrong. It really will be because of technical IT issues. Please get a grip or stop commenting.

          1. lolcar

            Discussion above is good, I think. If the process of granting a new ISO code for the drachma is dragged out, is that a technical IT issue. Absolutely. Can’t program the computers to handle the new drachma without it. At the same time, it absolutely isn’t. It’s an arbitrary string – it could be allocated overnight if there were the will to do so. If there turns out to be a month of dickering over what the new currency code should be then I’m going to say that the real issue is not “technical” however it may be presented. If the major Western banks then take months to set up SWIFT for the new currency, again I’m going to say that there are more than technical difficulties at work.

  10. craazyman

    If Germany wants Greece out bad enough, Germany can pay for the drachma conversion and use German IT firms, who’ll make lots of money, pay taxes back to Germany, and even employ Greeks.

    What’s the one thing Greeks need now? Jobs. This could be it. Germany gets jobs too, and contracts for their corporations. It could be like a Marshall Plan.

    What’s the problem? Everybody wins. Remember, one man’s cost is another man’s revenue. That’s the first law of economics.

    The second law is, the two men have to negotiate. That’s the hard part. Not the actual work.

    1. Katniss Everdeen

      I was thinking about Russia. Hasn’t Putin offered to help Greece?

      Russia and Europe are trading partners, and so, presumably, Russian systems have plenty of currency conversion capacity and are able to deal with euro decimals and symbols. Several years ago McDonalds experimented with drive-thru orders being taken in India and routed back to the US store. Couldn’t Greece “piggy-back” off Russian systems for awhile until they got their own up and running?.

      And didn’t I read somewhere, Michael Lewis’ The Flash Boys maybe, that Russian coders are some of the best in the world and highly sought after by financial firms? I’d imagine that they could help the Greeks do what needs doing accurately and efficiently.

      I can’t believe that there really IS no alternative for the Greeks except to submit.

      1. NotTimothyGeithner

        Putin has offered to help but has noted the debt is too large to jump to the rescue. Russia has a refugee crisis (2 million Ukrainians plus the usual arrivals from Central Asia), a saber-rattling U.S., an economy undergoing internal transition (not necessarily bad, but they may not want to throw money at an unneeded problem), and a Europe that passed sanctions against Russia. Putin knows Merkel is protecting financial institutions that made bad loans. Why would Russia bail Merkel out? Goodwill?

        Would running a dual-currency system with the ruble be possible in a short time frame? Instead of drachmas to every currency, the neo-drachmas would be converted to rubles or dollars at an agreed upon rate and limits at periodic junctures.

      2. Yves Smith Post author

        Putin has merely feigned polite interest. He does not want to be seen as meddling in Greece to give the US neocons excuses to try new stunts. He has no incentive to act now. If things get bad, he has far more leverage, at much less cost, later.

        Russsian coders are private business people They need to be paid, They are not free resources. The ones that are any good sell their services to places like the US.

        As Mark Ames says, “You never want to depend on Moscow for your survival. Just ask Serbia how well that worked out.”

  11. southern appalachian

    Who has programmers? Where do they get them, and what do they pay them with? Siemens? It makes me wonder about something like TISA – looks like a threat after all this. Voluntarily making oneself weak.
    Also seems to me Greek sovereignty is a worthless thing. If they don’t have enough programmers – and this only one industry – any sort of vote has got to be meaningless.

    So they start to align with the BRICS, maybe they get an Infosys in, that new development bank might help finance the conversion, maybe in exchange for ports. That’s pretty far-fetched. Thing is, none of this makes sense to me. Can’t figure why the EU wants a failed state on their southeastern border. Maybe their head is so far in the trough they can’t see what’s going on around them.

  12. jabawocky

    Apologies if i am posting this late but this interview outlines the plans that Varoufakis had for issuing currency in the event that the ECB pulled liquidity from the Greek banking system. Clearly he was outvoted (6:2) which shows how close they came for enacting Varoufakis’ plan. He aimed to issue liquidity but within the euro system. I am not expert enough to tell exactly where it would have ended, especially the central bank takeover, which seems to me quite unlikely.

    1. Issue euro denomiated liquidity directly, perhaps in the form of IOUs.
    2. take over the central bank.
    3. haircut ECB bonds

    It also contains a lot of little gems that give some interesting insights to the functioning of the eurogroup, some of which will be of no surprise to readers here.

    1. Lambert Strether

      Varoufakis did not have a plan. He had a plan to have a plan. You’re confusing a set of bullet points with requirements and specifications. (To shift metaphors: You’re confusing an architect’s doodle not only with blueprints, but the master contractor’s punch list.)

      1. papicek

        Sadly true. I would’ve taken his guidance but what was needed was something other than an academic in that position at this time.

  13. Jim

    All chance of any progress is bloaked by the decimal point. I always distrusted those damm dots. If we had stuck with cuneiform tablets these problems would never have arisen.

    1. washunate

      The funny thing is that we Anglo-Americans are the weirdos. Europeans and most countries use commas :) Interestingly, the Chinese I think are essentially the only other major country that views the decimal point the way we do.

  14. Dimitri Lascaris

    Whether one favors Grexit or not, the unavoidable reality is that it is coming. The political conditions in Europe are such that there is no realistic prospect of a deal being struck between Greece and its creditors that will preserve Greece’s place within the Eurozone on a long-term basis. Indeed, Yves herself explains in another post today why the Brussels deal is likely to unravel, and even if it does not unravel, it will not prevent a Grexit, but will merely delay it. Therefore, the debate over whether Grexit or the toxic Brussels deal will impose more hardship on the Greek people is secondary at this stage. Rather, the left should be focused on the question of how best to limit the hardship that Grexit will occasion, taking into account the political, economic and technical realities confronting Greece.

  15. Edward Qubain

    Can Greece survive for a while with a non-IT currency? That is how countries operated 100 years ago.

    1. Nathan Tankus

      a currency is internationally useful because it lines up with the standards of that society. An IT system transported back 100 years wouldn’t be all that useful for a currency in international terms because all these IT systems are designed to interact with IT systems around the world.

      Without electronic trading of the currency (which requires an IT transition) no one will transact in Drachmas internationally because the FX risk is literally incalculable. It would of course be used domestically and there would be a cash exchange rate with the Euro but not much beyond that. if you’re a Greek who consumes food to survive, uses electricity and/or has some basic medical needs you may question your ability to survive in that case.

      1. Edward Qubain

        Does every country in the world today have an IT mediated currency? If not, how do they survive? Could Greece use multiple currencies for different purposes? Why exactly would the FX risk be incalculable? 100 years ago countries had non-IT currencies with managable FX risks.

        1. washunate

          Yeah, it depends on what you mean by IT mediated. Conceptually, usually the issue in contemporary international money flows is how a bank in one country gets access to accounts in another. We don’t trade physical goods and services, or even physical symbols of national currencies. We trade electronic symbols of national currencies – keystrokes in computers. So it’s an IT matter.

          But there are workarounds; it’s just that they are labor intensive. The extent to which the benefits outweigh the costs of such labor is a dynamic equation taking both variables into account. In a true pinch, there are alternatives where the benefits side rises so dramatically that extremely costly options, like gold trading, become net beneficial.

          Iran is probably the best example of this. The operational way the US imposes sanctions is by sanctioning banks that do business with them, and the US sanctions were so extreme they even got SWIFT itself to blockade Iran. But notice that’s an IT blockade. No one was physically guarding the Iranian border preventing the actual trade of physical stuff at gun point. Well, the American empire is encircling Iran, but it’s not active live fire shooting yet…

          Anyway, so one way around that blockade was for Iran to announce acceptance of gold in payment for oil. Direct international trade outside the banking system. In short, Greece’s challenge in an existential crisis is not IT. Rather, it is that the productive excess of its domestic economy (tourism, shipping, agriculture, etc.) needs to roughly match the size of its imports (energy, medicine, non-domestically sourced foodstuffs, etc.) so there is no need for a capital accounts surplus in the balance of payments. Direct trading of exports for gold/dollars/rubles/etc., and then gold/dollars/rubles/etc. for imports, will work modestly well as an interim solution while a national currency is prepared if the alternative to such a workaround is being a failed state. Especially in combination with some basic humanitarian assistance from friendly actors.

          But Greece wouldn’t be in nearly as bad a shape as Iran, because Greece isn’t being sanctioned by the US (unless, of course, the US responds to a Greek default by implementing sanctions…). Greece can simply continue using euros (and dollars and pounds and rubles and lira…). Foreign travelers to Greece can use their plastic cards because those cards are offered by foreign banks. They can also bring in lots of physical currency if they are so incentivized. Many Europeans already have euros, and even in the US, it is logistically rather simple to order euros from even your friendly local TBTF bank. They’ll even ship them to your house; you don’t even have to go to a bank branch in advance of a trip. Plus Greece is on the sea with a huge shipping industry. They’re not some landlocked nation that is hard to get stuff in and out of.

          Their challenge is that they have insolvent banks, which isn’t an IT issue. It’s a public policy issue.

          There is lots of info on what happened with Iran, a couple links:

          1. Edward Qubain

            Thanks for this informative response. I think the Greeks need to be creative about surmounting these obstacles, otherwise they will face disaster. They need to find a way to employ their unemployed which a new currency could facilitate. Unemployment must be a huge hidden cost for their economy.

  16. CSTH

    Yves (et. al.)

    Thank you for continuing to provide insight into why a Grexit would be so difficult.

    Even if i were not convinced that a ‘velvet Grexit’ is completely infeasible, I’d at least strongly suspect that its infeasible, especially given the expertise and experience of Yves and other commenters.

    So how can we move the discussion beyond the ‘the IT is really hard / the IT is not as hard as you think’ spiral?

    In other words, if we stipulate that the systems can’t be rebuilt on any viable timeline, and we also stipulate that Greece is likely to have to leave the Euro at some point in the relatively near future, then what scenarios present themselves?

    For example, during the 06-08 crisis, there were many ‘crisis weekends’ when a non-viable (non-) bank needed to be resolved – basically – between dinner on Sunday and breakfast on Monday. It was obvious to everyone that a ‘proper’ bankruptcy would be impossible under those conditions (and maybe not possible at all, on any timeframe), and that the resulting chaos would be devastating generally. As a result, the Fed & Treasury executed a series of shotgun weddings, often ‘looking the other way’ on accounting and regulatory restraints in order to execute a controlled crash landing (to mix a metaphor) for TBTFs that were Failing nonetheless …of course, the surviving entities (Wells Fargo, BoA, etc.) continue to bear the scars of those solutions…but they ‘got the job done’ for the purposes of weekend-scale crisis management. And of course, eventually, Lehman became the exception that proved the wisdom of this approach.

    So what are the ‘unconventional’ scenarios available to Greece? I’m a complete amateur, but some scenarios occur to me (just to frame the discussion:)

    1. Merge the major Greek banks with a third-party entity that already has existing access to int’l payment systems: – small island nations, a European micro-state, or some oddball vestigal entity buried somewhere in the int’l financial netherworld…..

    2. Take shelter under the wing of another major global reserve currency: Dollarise, yuan-ize, gold-ize, etc.

    3. Do a reboot from the ‘BIOS’ up – trade-able 2 liter coke bottles, etc.

    4. Take a flier on some weird hybrid of MMT and mobile payment tech


    My premise is that there must be ‘solutions’ (or at least scenarios) that preserve some elements of a desired end-state (e.g. can pay for oil and insulin, if nothing else) even if they also completely fail in other dimensions (e.g. electronic services available at retail level at some point before, say, 2020) and create very hard long-term problems.

    What are those other solution scenarios….???

    1. tegnost

      point 1 this is a possible scenario in the industrial reconstruction, give ” ownership” to parties who have access to payment systems. A nefarious scheme in my opinion. Point 2 it seems to me too much currency manipulation schemes would be upended by this point, but i’m no expert. Point 3 Likely, I suppose, in a worst case people will come up with a tradeable commodities thing, but Greece must import, so won’t work. Point 4 as has been unarguably made clear, takes too much time. It’s a chocolate mess.

  17. JTMcPhee

    In some ways, it’s comforting to be nearer the end of my personal life than the middle. Watching the asymmetric and semi-mutual vulnerabilities manifest over the last 70 years, nuclear weapons, climate degradation, the “financial system, GMO, potentially terminal technologies, and a long tail of et ceteras, has been the cause of lots of my personal inconsiderable sorrow in a world full of pain. Same rotten purblind self-interested sh!t, a horrid fugue in a dissonant minor chord. Over and over, with minor variations.

    Speaking of Greek culture and history, recall one version of the minatory myth of Pandora, where the last of the plagues on humanity her curiosity or misfortune (depending on the mysogyny of the teller) loosed from that fateful chest, and the worst plague by that account, was ” Hope.”

    On the other hand, our Rulers count on our ordinary-person perpetual willingness to go Over The Top into interlocking fields of machine gun fire and across the mine fields of No Man’s Land, to keep the hierarchies “alles in Ordnung” and the machines of conflict running full tilt. “When duty cries, ‘You must!,’ the youth replies, ‘I can!'”

    Seems like there is informed consensus that the place called “Greece” will “exit,” inevitably and irretrievably, via accident, error, and this: “The Global Financial Crisis—caused by Greed, Moral Meltdown and Public Policy Disasters,” I wonder how much resilience and meta-stability are left in our “systems of systems…”

    “If anything’s gonna happen, it’s gonna happen out there,” said Captain Ron…

    Soldier on, people!

    1. cnchal

      Thanks for the wargo PDF link. A fascinating read, with inadvertent humorous sections.

      What causes overconfidence?
      Richard Peterson is a psychiatrist, neuroeconomist and stock market trader. In his book, Inside the Investor’s Brain, Peterson states that one of the worst of these biases is overconfidence‘, also known as hubris or in the case of corporate managers, CEO disease‘. It is observed in the tendency of CEO‘s to under perform after achieving the top position in their firm. Similar behavior is seen in ‘Nobel Prize Disease‘ – the subsequent intellectual sterility of Nobel Prize winners and Victory Disease‘ – the tendency of military commanders, after a series of battlefield triumphs, to subsequently show poor judgment.

  18. Michah

    Mutiple Currencies are already being used in most western economies. Most corporates already manage multiple parallel accounts in euros, dollars, yuan, etc. So adding a Drachma to that list does not introduce anything new. On the other hand, in the streets, in the shops and restaurants, I’m sure people will manage, if they want to. Just like an American with USD can get by in Europe in most cases with a little good will, so will the Drachma holder manage until things settle down. If the bill is given in Euros, he’ll just pay in Drachmas the equivalent amount. There’s no need for 6 digits after the 0 to figure out how much a cup of coffee costs.

    As for IT re-engineering, wouldn’t this problem just create some great new jobs for all those young unemployed and wouldn’t that be just the thing needed to give them some on-the-job training before they set out and create that next new start-up??

    Sooner or later the transition will happen because of forces of gravity, and when it does, I’m confident that life will go on. That’s for sure. Parakalo!

  19. washunate

    That’s why you don’t convert to drachma immediately.

    You use the euro until such time as the reintroduction of a national currency unit is feasible. The proximate issue is the insolvency of the major banks, not the currency unit.

  20. dbk

    As Dimitri Lascaris noted above, Grexit is looking more and more inevitable, despite the dreadfulness of the prospect for Greeks. The creditors’ proposal is loaded down with so many extreme conditionalities that at some moment, beyond the sheer fact that even the IMF has now admitted the debt is outright unsustainable, there will be a tipping point event.

    Here’s just one example of “extreme conditionality”:
    I saw a tweet from a young professional yesterday. His income is 10.000 euros. Beginning next year, he (and all other free-lance professionals) will be required to pay two years taxes at once (for 2015, and up front for 2016). Let’s look at how this plays out numerically:

    Income = 10.000 (and yes, that’s what all but a very small % of young professionals earn)
    Taxes = 2900 + 2900 = 5800 (29%, up from 26% currently, with no deductions allowed)
    Pension contribution = 4000
    Special contribution to professional fund = 650 euros

    So, 10,000 in earnings, 10,450 owed in 2016. Huh? What genius came up with this math?

    I’m not in IT, but I worked with IT people who were designing in-house systems for many years. One of my offspring is now serving as agency liaison for the introduction of a new CMS at a large public body in the U.S., and the problems of smoothly incorporating multiple levels of data from successive legacy systems are legion – in fact, my eyes glaze over at the conclusion of each week’s lecture on “what went wrong this week” (and they’re in beta-testing, no less). It’s very hard, yes; it requires extremely competent coders, yes (Greece has a surfeit of coders, not a few of them Russian emigres – and btw, the discussion of Russian coders was indeed in Flash Boys, which I recently read), and it needs conscientious and coordinated, knowledgeable organization – cooperation between the coders/programming side and the agency/implementation side (presumably here, the BoG). So yes, hard.

    But frankly – and this is a genuine question for commenters – what other option is there?

  21. dw

    what are the odds that when the euro ‘conversion’ was done that the drachma code wasnt replaced but just logically bypassed? its basically how most of the Y2K changes were done with windowing. the exceptions being the ones that had a long life span (like maybe mortgages. which had to deal with Y2K long before the 1990s. and auto loans, which had to deal with it long before 1996.and others). now dealing with euro as a new foreign currency will be a major change

    1. papicek

      Odds are vanishingly small that deactivated legacy code for the drachma is still a part of existing POS, banking or trading software in use today. Odds are far greater that drachma upgrades as I described above have already been completed and are waiting to be rolled out. The rollout is the expensive part and will be delayed until it becomes absolutely clear that it has to be undertaken.

    2. Louis Proyect

      what are the odds that when the euro ‘conversion’ was done that the drachma code wasnt replaced but just logically bypassed? its basically how most of the Y2K changes were done with windowing.


      What in god’s name is this supposed to mean? I did a Y2K conversion at Columbia University. You have to go through millions of lines of code looking for anything like mm/dd/yy and changing it to mm/dd/yyyy. Sounds easy, no? Well, how do you know a programmer identified some piece of code like “todays_date pic x(8)”? Maybe he or she identified it as “tdy_dt pic x(8)”. This is the kind of technical minutiae that can become the iceberg that sank the Titanic.

      1. papicek

        Yup. System code is like that. Microsoft’s compiler division broke all the rest of the company’s code when they upgraded from 32 bit to 64 bit architecture.

        But we’re not talking systems here. This is application & presentation levels stuff & if that’s not already modularized, developers should be sacked on the spot.

        1. Yves Smith Post author

          Go back and read Clives’s comments earlier in the thread. This stuff is NEVER modularized in large corporate installations, and most certainly not in large financial institutions. You can talk about how it ought to have been done, but it just is not done that way in organizations of any scale.

        2. Clive

          To expand on the point made by Yves above, and why it is correct.

          When I read comments along the lines of this one, to summarise the argument being made which is “why oh why isn’t it the case that (insert modern software development practice here) is not done in (in this case, your typical TBTF’s core systems) they’d be mad / incompetent / lazy not to do so” I’m reminded of stale arguments which have been made ad nauseam at these institutions and have become well settled to the point where no-one there really bothers any more with them.

          I’ll issue a reminder here which should be superfluous but perhaps isn’t. These are businesses. They are in the business of making money. They are ruthlessly focussed at this and c-level execs live and die, career-wise, by the quarterly results. Controlling controllable costs is the second highest priority, right behind finding new and inventive ways to extract profits from customers. Any c-level direct report who, and they would most assuredly be seen in this way, waffles on about technical purity would get a polite hearing once or twice, but if they persisted that would be the end of them because they’d be committing that cardinal sin in a TBTF’s culture of not being sufficiently business minded.

          While what you say about the benefits of modular, re-usable and even platform independent code is true, in the maybe 5 minutes you’d have to make your pitch for it to the c-level exec who holds the investment purse strings (they have attention spans that would shame a mayfly, usually) you’d better be able to say, precisely, how much cost rewriting and existing spaghetti code would save and what it would take to get to the end result.

          Every single penny which is reluctantly allocated for IT investment at a TBTF (and similar enterprises, the way the landscape is shaped is very consistent across the industry) has to satisfy a 5-year (typically) business case. It must not only make up the costs of the project, it must pay back within that timeframe and show a return — 20% is the minimum.

          Oh, and I should also mention that TBTF-scale enterprises are riven with politicking and factionalism at every turn. Squabbles and backstabbing abound and are usually around who is getting the funding, how much and how important they appear to be to the CEO. Gifting influence and power to the IT department via generous funding increases the IT department’s profile to the inevitable detriment of others. So naturally any funding request for IT spend has to be set against that power dynamic.

          Of course, you can put non financial benefits in a business case. But the way business case construction works means that it is very bad at capturing non financial benefits properly. NC has covered in depth short-termism in modern capitalism at length in previous features. The only way that non financial benefits get a look-in is if the company is facing clear, onerous, immediate risks. To give an example, one of the key systems at a TBTF was running on a mixture of COBOL and assembler and was a nightmare to maintain. But it wasn’t until it got to the point where programmers with good, solid assembler skills become almost impossible to find — at any price — that the risk mitigation of porting the application to vendor neutral C got green-lighted.

          So it is not at all right to say that developers are incompetent. Any bullets fired in their direction are misaimed. But — and the parallels of a recently departed finance minister strike me here — you can’t be a technical purist hold-out alone, you have to appreciate the investment climate, any political machinations in play and the fact that producers (of earnings) are given about 10x the credibility and bandwidth that cost centres are.

  22. tim s

    No doubt about the difficulties – they are immense, and may bring many to their knees. But this is an epic crisis for the Greeks and ultimately one of survival as a culture. If there is any life left in this culture, they must find a way to work through it.

    If, as it appears, they have truly been sitting on their hands hoping for a political solution to save them, and their ability to work together with a common interest for a common goal is so withered and decayed, then the odds of survival are greatly reduced. It is what it is, and it is well past time for the Greeks to get working on SOMETHING to have enough continuity for survival, and to this point, some form of exchange would be priority. If the systems are that complex and poorly maintained, then the hill is just that much steeper, but it is a hill that must be climbed regardless if Greece is to survive.

    Grexit (forced or chosen) = liberty or death
    stay in Eurozone = subjugation in most every way

    Every Greek with any love of their history and hope for their future needs to look at what they can do to keep their culture alive and free. This assumes that they are significantly alive at the moment, which I admit is a tenuous assumption for many western cultures at this point in time. Every other western culture needs to look at this Greek situation, then look at themselves in the mirror, and then look into the dustbin of history and reflect for a while. Most of us are not that far removed from where Greece is now, for many of the same reasons, and many of us need to wake up, get some redundancies in our systems, and strengthen our backbones.

  23. WorldisMorphing

    The technical aspect, daunting as it is, is the easy part. Germany offered technical assistance, I don’t doubt for a second their sincerity on this matter…

    The hard part would be floating the currency to a “functional” level so that you can afford the [oil] imports long enough to transition the economy towards greater self-sufficiency; because make no mistake, the end of [real] growth is here whether you like or not.
    Even if growth was still possible, Greek demographics, even more so than everyone else’s, would preclude it.

    1. washunate

      floating the currency to a “functional” level

      That seems to be the elephant in the room. Greece wants the benefits of the New Deal without the costs of currency devaluation and bank closures.

    2. papicek

      I’m not so sure that bank closures per se would be the biggest headache. The US has seen thousands of banks go under in my lifetime & this hasn’t meant anything worse than the dissolution of the FSLIC (folded int FDIC, which Congress then capitalized). I think the biggest headache results from Greece’s eager foreign reserve holdings, insufficient to support it’s (meager) trade. Managing the inputs & output of that is fraught.

      1. washunate

        That’s where currency devaluation comes in. FDR had closed banks and devalued the US national currency (dollars) relative to foreign reserves (gold) by about 70% within his first year in office. After that, foreign reserves poured into the country (even in the midst of a global depression).

        That’s what is so different about the Greek situation. They have neither closed down insolvent banks nor pursued a mechanism for devaluing a national currency (a reintroduced drachma) relative to foreign reserves (euros). Euros would pour into Greece for the stuff Greece makes. The question is that of price.

  24. Jesper

    Greeks might be forced to choose between:
    -using credit/debit cards linked to accounts in a new currency
    -not having anything to pay with (EUR liquidity dried up)
    Needs might trump preference when it comes to payments. The logistics of printing a new currency and loading ATM might simply be too much of a challenge.

    About the currency code:,Authorised=false.html?
    Quote from the article:
    “A new alphabetic three-character code – most likely GRN – would be needed to distinguish it from the old code for drachma, GRD. “

  25. papicek

    RE my previous comment:

    Who takes an instant hit from a return to the drachma (in my the “Greek-euro” option)? People with Greek euros (see my comment above), but they’re going to be hit hard one way or the other, regardless. As for Greek individuals and companies with euros sitting in Swiss banks, it remains to be seen how those banks will act. Would they return a devalued Greek euro on demand or honor the nominal value of the euros when deposited? I’d expect fireworks, but those banks have already lent out those euros at their full EMU valuation so the case for full return is, I think, quite strong. Furthermore, foreign holders of Greek debt would certainly demand full EMU value. Would their own banks give those entities a haircut?

    At any rate, I have little regard for tax evading Greeks who moved their wealth outside the country. OTOH, businesses with foreign bank accounts to more easily conduct transactions overseas are my bigger concern and again, that depends a lot on whether the foreign bank values the.account at the value when deposited (which has already been accounted for by these banks) or not.

    A new drachma currency would be cleaner, certainly, but I don’t believe it is absolutely necessary.

  26. IsabelPS

    If nerves are getting frayed at NC, just imagine what it must be in the instances where decisions must actually be made.

    1. Clive

      In my imagination, it will be a bit like reading through a week’s worth of ZeroHedge all in one sitting, but without the sense of restraint, coherent arguments and inherent moderation shown the participants there.

      1. MRW

        it will be a bit like reading through a week’s worth of ZeroHedge all in one sitting

        Thanks for the laugh.

  27. IsabelPS

    All this discussion reminds me of something I read after 9/11, some war games played at the Pentagon to find out the most secure way to pass information when surrounded by potential enemies among the population, etc. It didn’t go down well, apparently, but the winner was a proposal to use messengers on bikes, donkeys, whatever.

  28. IsabelPS

    Thank you. I have always liked that story very much.

    And yes, of course there will be solutions. There are always solutions, sometimes very unpleasant ones.

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