Last December, the blog raised the question of how a country like Greece could actually leave the Eurozone. Many people believe this is inevitable. But how would the practical issues be solved?
Now Wolfgang Münchau has taken up the challenge in the Financial Times. His research suggests there are only two possible exit routes:
• A Treaty change, to reverse the Lisbon treaty
• To leave the European Union (EU) itself under Article 50
Münchau rules out the Treaty change option as being impossible. The Lisbon Treaty took 9 years to complete. Agreeing to leave would similarly need an inter-governmental conference, plus agreement by all national parliaments, and national referenda.
So leaving the EU itself is the only practical option.
If, for example, Greece left, then it would lose all its agricultural subsidies and structural funds for highways etc. It would also have to redominate all its contracts from euros to drachma, and default on all foreign contracts.
And, of course, the currency change would have to be done within days, if not hours. Otherwise, Greeks would simply move their money abroad, and the economy would collapse.
The end-result would therefore be chaos. Those owed money by the government or companies would sue to try and recover their losses. Investors would also pull out of other PIIGS countries (Portugal, Ireland, Italy, Greece, Spain) where a similar disaster could take place.
And even then, there would be no solution to the problem of euros, like that pictured, which have Greek origin. Would these still be accepted in other Eurozone countries? Many shops and businesses might well not want to take the risk of default. This would create more chaos.
Münchau concludes that those who argue that a country could easily leave the Eurozone are fooling themselves. He believes that there is no "situation in which an exit can be effectively and voluntarily negotiated".