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Eurozone Crisis: Who Wins If Greece Leaves The Euro And Brings Back The Drachma?

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Greek drachmas (file)
Greek drachmas (file)

Even as European markets tumbled amid fears Greece could leave the euro, at least one stock was on the rise: a currency printer.

De La Rue is a British security printing and cash handling company listed on the FTSE 250 index, which has previously indicated it could benefit if - or when - Greece needs to print a new currency.

True, Greece has its own state-owned printer for such a task, according to the Independent. But analysts say the speed at which the currency would have to appear would give De La Rue a good chance at grabbing a new lucrative contract anyway.

In November, De La Rue boss Tim Cobbold said a Greek exit from the single currency could lead to new "opportunities" for the company.

The markets appeared to agree, and De La Rue's stock price rose 31.5p to £10.24 on Monday.

So for De La Rue at least it's not all doom and gloom. So who else likely to benefit if Greece was forced to return to the drachma?

In the short term it's not likely to be the average Greek citizen, Nick Parson, head of strategy at National Australia Bank, told the Guardian - even though the alternative of massive austerity cuts and a long depression isn't much better.

Indeed with huge public job cuts, GDP retreating 6.2% in the first quarter of 2012 compared to a year ago and shocking (albeit rare) stories of citizens committing suicide over their debts, Greece has a long way to go to see anything other than a choice between "awful" and "really awful".

"If it exits, it could see the collapse of the domestic banking system, the decimation of private savings and a crippling increase in the cost of imported goods and energy," Parson said.

Devaluation will also be a problem. Parson points to the example of Argentina, which abandoned a 1:1 parity with the US dollar in 2002 only to see the peso lose 75% of its previous value.

However the rest of the eurozone could be much better off, he adds.

"A Greek exit could be the trigger for a stronger and more stable euro, led by politicians and institutions with a clear interest in both its success and theirs.

"Should Greeks choose self-determined, rather than European-imposed pain, the outlook for financial markets should be much brighter by the year end," he said.

Other analysts paint a similarly bleak picture. According to analysts speaking to Forbes, the Drachma would quickly lose 50 to 60% of its value, the Greek banking sector would collapse as funding costs rise, and business would find itself crippled.

Forbes added that companies with exposure to Europe - from banks to McDonald's - would see sales slow and profits decline.

Other economists argue that Greek businesses would benefit from a new currency - and least in the short term - because a Greek default and exit would remove the pressure of debt, "boosting competitiveness, lifting austerity and allowing for proper restructuring of the economy" said Costas Lapavitsas, professor of economics, School of Oriental and Asian Studies at the University of London.

So what about the UK?

British banks are already working to make sure that if Greece does leave the euro, they can profit. For while Greece would probably impose controls to restrict foreign exchange, it would still be possible for banks to trade the new currency with more complex derivatives.

"Forex desks can get ready relatively quickly. It depends on exactly how the exit from the euro happens," said Lewis O'Donald, chief risk officer at Japanese investment bank Nomura, to Reuters.

Bu despite the banks readying themselves to make the most (money out of) of any exit, Britain should be under no illusions that it will be better off if Greece leaves - at least according to Chancellor George Osborne.

Speaking in Brussels, where he is attending talks between European Union finance ministers over the continuing crisis, Osborne criticised the "open speculation" by some eurozone members.

But he also said that "it's the uncertainty that's causing the damage" - so will the UK eventually be better off once Greece's future is determined one way or the other - whatever route it decides to take?

John Cridland, the boss of the Confederation of British Industry, says that either way the UK still has much to fear - especially since there is a real chance the entire EU could go into meltdown if Greece makes an unprecedented exit from the single currency: "Clearly the concern is it will impact not just on the wider eurozone but the British economy, given half our exports go to the eurozone," he said, according to the Daily Record.