Greek Drachma: History, Collapse, and Lessons for Australia

The Greek drachma was once among the world’s oldest and most storied currencies, circulating in different forms for over two millennia. While it disappeared in 2002 with Greece’s adoption of the euro, the drachma’s journey—marked by resilience, crisis, and reinvention—offers surprising insights for Australians navigating today’s shifting financial landscape. As debates about currency stability, inflation, and globalisation heat up in 2025, the drachma’s saga is more relevant than ever.

The Drachma: A Currency Through the Ages

Introduced around 500 BCE, the drachma was a symbol of Greek commerce and culture. Over the centuries, it weathered wars, empires, and revolutions, eventually becoming modern Greece’s official currency in 1832. Its story is punctuated by dramatic episodes: post-war hyperinflation, currency devaluations, and, finally, its replacement by the euro in 2002.

• Hyperinflation of 1944: The drachma suffered one of history’s worst inflations during World War II, eroding public trust in money—a powerful reminder of the importance of sound fiscal policy.

• Devaluations in the 20th Century: To stabilise the economy, Greece repeatedly devalued the drachma, making exports cheaper but raising the price of imports and sparking social unrest.

• Eurozone Entry: In 2001, Greece fixed the drachma’s value to the euro, symbolising both hope for economic modernisation and the beginning of new fiscal challenges.

Modern Parallels: Currency Stability and Policy in Australia

While Australia’s dollar is a far cry from the drachma’s turbulent past, the lessons resonate in 2025. Recent RBA policy updates, including a cautious approach to interest rates and a focus on inflation targeting, reflect a keen awareness of the perils of mismanaged currency.

• Inflation Control: Australia’s annual inflation rate is expected to hover around 3.1% in 2025, a figure closely watched by policymakers wary of the kind of runaway prices seen in Greece’s history.

• Floating vs. Fixed Exchange Rates: Unlike Greece’s late-20th-century peg to the euro, the Australian dollar floats, allowing more flexibility in responding to global shocks. Still, the volatility of international trade and geopolitics keeps central bankers vigilant.

• Fiscal Responsibility: The Albanese government’s 2025-26 budget maintains a focus on debt reduction and targeted spending, conscious of the need to avoid the fiscal pitfalls that led to Greek crises.

Australia’s experience is a study in contrasts—and caution. Where the drachma’s fate was shaped by political instability and external pressure, Australia’s policy stability is a key strength. Yet, as recent debates about digital currencies and monetary sovereignty show, the conversation is far from over.

What Australians Can Learn from the Drachma’s Journey

The drachma’s story is more than a history lesson. It’s a case study in the importance of trust, adaptability, and transparent policy for any currency’s survival. As Australians consider the rise of digital money, global economic headwinds, and domestic cost-of-living pressures, the drachma’s ups and downs offer practical takeaways:

• Trust in Institutions: Public confidence in the Reserve Bank and government fiscal policy is critical—just as the drachma’s declines were hastened by waning trust in Greek authorities.

• Adaptability: Economic shocks are inevitable, but flexible policy responses—like Australia’s floating dollar and inflation targeting—can help absorb the impact.

• Learning from History: The drachma’s collapse wasn’t inevitable; it was the result of choices. Australia’s continued prosperity depends on proactive, prudent decision-making.

In a world where economic winds shift rapidly, the drachma’s tale is a timely reminder that currency strength is built on more than numbers: it’s about policy, trust, and the willingness to learn from history.