All return to national currencies

Germany should commission a top-secret task force, to prepare a plan for use only should one country be imminently leaving the eurozone. The plan would call for an emergency meeting of the leaders of the 17 eurozone states, and the German chancellor put to them the proposition that they collectively, and immediately, abandon the euro, reverting to their national currencies at euro entry rates.

The ECB would be abolished and its functions returned to the national central banks. All bank accounts, assets, liabilities and obligations in each member state would be immediately redenominated into national currencies. Assets, liabilities and derivative contracts that are not identifiable as domiciled in a specific state would be redenominated into a run-off ECU - a basket of the new currencies weighted by ECB shareholding.

All member states would agree to extend unlimited liquidity to the banks domiciled in their states, and most would require re-capitalisation. Euro notes and coins would all be redenominated into the currency of their issuing national central bank (euro notes have serial number prefix letters identifying the issuer). National notes would be printed as soon as possible. Markets would re-open after enforced bank holidays, and the new drachma would fall, say, 60% below its official euro conversion rate; the new deutschmark would rise, say, 20% above its official conversion rate.

This would allow the southern states to get back to work, and curb Germany's chronic trade surplus with the eurozone. This route would be cataclysmic, but would finally end the crisis, and lay foundations for a new Europe. The German chancellor would explain that should they not all agree to Germany's request, then Germany would implement a separate plan to leave the euro itself.

Date: 2015-04-20; view: 866