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When a country adopts the Euro, what happens to its debt?

When a country, say Greece, adopted the Euro as its currency, what happened to the debt that was based on the Drachma? Was it converted into Euros?

1 Answer

Yes, upon the introduction of the euro on January 1, 1999, all debt (indeed, all nominal contracts) in participating countries was converted from national currency to euros at a legally defined conversion rate. See this press release from December 31, 1998, which states:

In accordance with Article 109l (4) of the Treaty establishing the
European Community, the irrevocable conversion rates for the euro were
today adopted by the EU Council, upon a proposal from the Commission
of the European Communities and after consultation of the European
Central Bank (ECB) for effect at 0.00 on 1 January 1999 (local time).
In compliance with the legal framework for the use of the euro, the
irrevocable conversion rate for the euro for each participating
currency is the only rate to be used for conversion either way between
the euro and the national currency unit and also for conversions
between national currency units.

The euro conversion rates are the following…

For the particular case of Greece, which joined the euro on January 1, 2001 instead, the conversion rate with the drachma was apparently set at 1 euro = 340.750 drachma by this regulation in June 2000.



Not apparently -that was indeed the conversion rate.
– Alecos Papadopoulos
Dec 22 ’14 at 1:13



@Alecos, I didn’t mean to suggest that the rate was in doubt; the “apparently” was about whether or not that particular regulation was truly responsible for setting the rate, which is always a little unclear. (i.e. the June 2000 regulation could have just been restating an official number that had already been bouncing around for a few months. I don’t think so, but I’m not familiar with the exact sequence of events in 2000.)
– nominally rigid
Dec 22 ’14 at 3:12



Oh, I misread. Now that I think about it, if the word “apparently” was placed immediately before “by this regulation” and preceded by a comma, I wouldn’t have thought the the conversion rate itself was maybe in doubt. But then again, English is not my native language, so all misunderstanding is mine…
– Alecos Papadopoulos
Dec 22 ’14 at 3:35



No problem. My wording was a little ambiguous. 🙂
– nominally rigid
Dec 22 ’14 at 3:43

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