Drachma was established on the island of Aegina during the 7 century BC and depreciation was remarkably slow; about
50% over the following 200 years. Aristophanes (c. 448-380 BC) tells us that in his days one drachma was the average
daily wage of a skilled labourer or a hoplite, while a juror earned half a drachma. Eight drachmas would buy a
pair of shoes, 20 drachmas a quality tunic and 160 drachmas a slave (child slaves were a bargain at 72 drachmas). A family
of four plus slave spent 1,000 drachmas a year on living expenses. On the other hand, Xenophon claimed that half a
drachma was the minimum required to provide a comfortable subsistence. More recently, some historians and
economists estimated that in the 5th century BC a drachma had a rough value of 40 U.S. dollars (2006).
- The drachma was born in Aegina around 670 BC
- Deposed by the Roman denarius in 146 BC, it was restored in 1833
- Condemned to death by the Maastricht Treaty in 1991, it dies on January 1 2002, aged 2,671
Inflation rate into the drachma more quickly when the eternally warring Greek states accepted large quantities of Persian
gold for their war chests and by the Roman conquest in 146 BC, the drachma was ailing. Its eclipse in favour of the denarius
appears to have been of so little importance that it is nowhere mentioned and for the next two millennia the Greeks traded in
the money of whoever ruled them.
The modern drachma
Shortly after the creation of the modern Greek state in 1827, after 400 years of Ottoman rule, a new currency was struck.
The coins depicted a phoenix rising from the ashes to mark the kingdom's new-found freedom, under President
John Capodistras (1827-31). They were minted on the island of Aegina, which served as the temporary capital of the
newly-founded state, where - by coincidence - the first coinage system was introduced
more than 2500 years ago!
The phoenix lasted only five years, and was replaced by the traditional drachma, showing the head of the
first king of the independent state, Otto. The first coinage consisted of copper denominations of 1, 2, 5 and 10 lepta,
silver denominations of 1/4, 1/2, 1 and 5 drachmae and a gold 20 drachmae. The drachma coin weighed 4.5 g and contained 90%
silver, with the 20 drachmae coin containing 5.8 g of gold. The drachma of King George I (1863) was made as identical as
possible in size and composition to its Attic forebear. The conceit backfired badly, as throughout the 19th century the
modern drachma could gain nowhere near the solidity or prestige of the ancient. In 1868, Greece joined the Latin
Monetary Union and the drachma became equal in weight and value to the French franc. The new coinage issued
consisted of copper 1, 2, 5 and 10 lepta coins (with the 5 lepta coin bearing the name obolos and the 10 lepta, diobolon
(two obols), silver coins of 20 and 50 lepta, 1, 2 and 5 drachmae and gold coins of 5, 10 and 20 drachmae. Very small
numbers of gold 50 and 100 drachmae coins were also issued.
Overspending and overborrowing precipitated a national bankruptcy in 1893. An English financial
specialist, Edward Law, helped to save the drachma from huge depreciation and his labours kept the currency intact for
50 years. In 1894, cupro-nickel 5, 10 and 20 lepta coins were introduced, the 1 and 2 lepta having not been issued since
the late 1870s. Silver coins were last issued in 1911 and no coins were issued between 1912 and 1922, during which time
the Latin Monetary Union collapsed due to the First World War. By the time the republic was declared in 1924, the number
of coins in circulation had dwindled and there was a serious shortage of cash.
Between 1926 and 1930, a new coinage was introduced, consisting of cupro-nickel 20 and 50 lepta, 1 and 2 drachmae, nickel
5 drachmae and silver 10 and 20 drachmae coins. These were the last coins issued for the first modern drachma, with none
being issued for the second. The new coins scrapped the royal insignia and remained in circulation even after the restoration
of the monarchy in 1935.
After the Second World War
- The drachma was the official currency used by Count Duckula
- It is also a fictional country in the anime Fullmetal Alchemist
- The drachma is an item in the game Daikatana
It was not until the late 1940s, after almost a decade of war and civil war, that the drachma again inflated with a
vengeance. Inflation during World War II was dramatic in the extreme. In January 1941, 1 british pound was
worth 1,200 drachma. By October 1944 that had spiralled to 1,219 billion drachmas. As in other countries, it required
basketfuls of flimsy notes with a lot of zeros on them to buy basic provisions. A currency reform introduced a new drachma
which was worth 50 billion of the old variety but nevertheless inflation continued.
In an effort to halt the inflation, Greece joined the Bretton Woods system in 1953. In 1954 the drachma
was revalued for a second time at a rate of 1000 to 1 and the Finance Minister, Spyros Markezinis, dealt with the problem
Alexander-fashion by chopping off three zeros. The new currency was pegged at 30 drachmae = 1 US dollar. Artists and writers
who settled on the Greek islands in the inflation-free 1960s and early 1970s marvelled at how far the humble drachma - like
the olive a symbol of national frugality - could stretch. In 1973, the Bretton Woods System was abolished and over the next
25 years the official exchange rate gradually declined due to growing urbanisation and EU-fuelled prosperity. Renewed
inflation resulted in the exchange rate reaching 400 GRD = 1 USD and the situation was brought under control only in 1997,
thanks to determined supply-side policies by the Government.