The choice can be attractive for nations in financial peril: Stop paying debts, fire up the printing presses and flood the zone with cash. But the euro, for Greece, foreclosed that option. Now, longtime advocates of an exit from the shared currency may soon prevail.

If Greeks vote this Sunday against the harsh austerity that Europe has demanded in exchange for a financial lifeline, European Union leaders have said that Greece will eject itself from the euro zone. The transition would be a financial experiment run on the fly — and even some who have long championed Greece’s old currency say they are worried about the chaos that could ensue.

Greece’s leaders have vowed to their citizens that they can reject austerity without rejecting the euro, but European leaders have said they will not blink. That has Greeks like Michael Karalis wincing as they stare at their life savings locked away inside banks, fearing that their euros could soon be converted into a less-valuable replacement.

“I know that I will lose my savings from a hardworking life,” said Karalis, 71, a retired engineer, as he waited to pull money from an ATM on Thursday. Long lines for cash have become ubiquitous in Greece after strict limits were imposed over the weekend on how much citizens could withdraw from their accounts. Now people are limited to 60 euros, or about $67, per day.

“I’m fine. But the savings was for my children and grandchildren,” Karalis said.

Greece missed its $1.7 billion debt repayment to the International Monetary Fund, becoming the first developed country to default. Here's a look at some of the fallout. (Jorge Ribas/The Washington Post)

A large majority of Greeks want to remain in the euro zone, and many do not see a “no” vote in the referendum as a rejection of the currency. But without serious talks toward a new bailout plan, the European Central Bank may feel that its rules oblige it to pull the plug on emergency assistance for Greek banks.

If that were to happen, the only way for Greece to maintain a functioning financial system would be a quick government decision to print an alternative currency.

The mechanics of a currency switch would be chaotic, if technically simple, with a return to the drachma or a new national coin of any other name potentially taking the early shape of government- or bank-issued IOUs. Greece, which now prints euros, as do the other nations that share the currency, could within weeks alter its ­presses to churn out national bills — or outsource the task to specialized companies abroad.

Some economists have argued for years that Greece should leave the euro. There would be short-term pain, they say, as Greeks adjust to the switch to a local currency that would probably be worth far less than the euro. But in the long term, advocates say, Greece would regain control of its monetary policy, finding itself once again able to boost stimulus spending even as a weaker currency makes its exports far more attractive on world markets. And more expensive imports would give an edge to domestic industries in the local market.

“Greece belongs to a deeply diseased monetary union,” said Kostas Lapavitsis, an economist and member of Parliament from the ruling Syriza party who has long called for a return to the old currency, the drachma.

“If Greece went back to a national currency, it wouldn’t be returning to some kind of paradise,” Lapavitsis said. “What we need is an economy that can deal with these extraordinary pressures and difficulties in an organized manner.”

He said he feared that if Europe pushed Greece off the euro by force, the results could be far more painful than if there was an organized, negotiated exit of the type he has long advocated.

In light of Greece’s financial troubles, restaurants and shops are noticing a drop in the number of tourists visiting Athens. (Reuters)

But critics argue that those who see a long-term benefit from a euro exit are fantasists who pay little attention to Greece’s recent history. A successful transition would require a government with a deft financial touch and a will to control spending. Otherwise, Greece could find itself again trapped in the cycle of high inflation it lived in before it adopted the euro. Runaway inflation could erode the value of salaries and nest eggs.

“If you have a smart and tough government, you could try to use a euro exit to get the country back on track,” said Peter Bofinger, an economic adviser to German Chancellor Angela Merkel. But if a government started increasing pensions and hiring more public-sector workers — a temptation in a nation where unemployment has skyrocketed and poverty is spreading — “the risk is a spending spree that would lead to hyperinflation,” he said.

Some analysts have pointed to Argentina’s devastating debt default and devaluation in 2001, and its subsequent recovery, as evidence that even a less-than-
reform-minded government can leverage its monetary policy to return to growth.

But Argentina differs from Greece in deep ways. Argentina is one of the world’s top 25 economies, a commodity-rich nation that exported its way to growth with soybeans, corn and heavy industries such as steel and cars. Greece, with an economy the size of Connecticut’s, lacks many of those advantages.

Instead, Greece risks replicating post-2001 Argentina’s downsides with none of the upsides. Today, despite Argentina’s growth, its government is still known for fudging economic data. Nearly 15 years later, it is locked in complex legal battles tied to its defaulted debt.

Winemaker Stellios Boutaris should be perfectly positioned to benefit from a Greek exit from the euro, by the lights of international economists, since exports are the great hope for Greece’s future financial success. His high-end wines, gathered from vineyards that stretch across his country’s verdant hills, would be more competitive abroad if his costs at home were in weak drachmas.

But instead of relishing an exit from the euro zone, Boutaris is worrying about his bottom line. Like many Greek exporters, he relies heavily on a supply chain of imported goods. Those costs could skyrocket while credit dries up.

Advocates of leaving the euro who say exporters like him would fare better on the drachma “don’t understand that we have to import bottles,” Boutaris said Thursday at an Athens wine bar, where the euro was the beginning, middle and end of all conversations. “We have to import corks. We have to import barrels.” Only the grapes themselves — and the workers — are local, since Greece doesn’t produce any of the other supplies.

All of those imports would become steeply more expensive if Greece went off the euro and began printing its own money.

With the days counting down to Sunday’s referendum, opinion polls show the vote too close to call. But amid fears about what will happen Sunday, many Greeks are trying to take euros from their accounts while it’s still possible.

“I don’t know what will happen, so I am trying to get as much cash as I can,” said Karalis, the retired engineer, as his turn finally came to use the ATM. “At the age I am, it’s very depressing to have to wait here in this line.”

Faiola reported from Berlin. Stephanie Kirchner, also in Berlin, contributed to this report.

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