Is it possible to leave the euro

Ala-Peijari, E. Kantor, H. Koskenoja, E. Malinen, I. Mellin, S. Miettinen, P. Nyberg, and S. Helsinki: Libera. Kearns, J. King, Mervyn.

New York: W. Kohn, D. Leibovici, and M. Louis Working Paper No A. Leinonen, H. Malinen, T. Nyberg, H. Miettinen, J. Ala-Peijari, and S. Meyer, D. Nechio, F. Nordvig, J. Proctor, C. Rose, A. As a result, no investments are made into the country during that period of time. Also, the requirement of money is very high at this time, given the crisis economic situation that engulfs the country.

As a result, the government is left with no option but to implement a horrific tax regime. All the money which is required by the government is raised by increasing the tax rates.

As a result, the tax rates rise making the production of goods expensive. This causes many employers to lay off their workers. The end result is that a condition of high prices and low employment prevails simultaneously.

To sum it up, exiting the Eurozone will not be an easy process. It may or may not be legal. Also, one exit will be like a domino causing exits of some member nations and collapse of other member nations. This is the reason why it is best that nations are able to amicably resolve their differences. An exit from the Eurozone would be tantalizingly painful. How to Leave the Euro? To Know more, click on About Us. The use of this material is free for learning and education purpose.

Then this plan is for you. Don't miss out on Our exclusive news stories and investigations. Why join? Already a member? Login here. Sep , So exhausted were they by the struggle by the time the soap opera ended, European leaders then swore it would be very long indeed, perhaps a generation, before the EU treaties would be opened again. Many of the supposed economic benefits inside the EU do not transfer to external trading partners.

The freedoms of labor and capital do not extend to the United States or China, for example, unless foreign consumers and producers gain access to a member country. As a result, it can be difficult to predict the potential fallout since it is possible that even stronger pro-growth policies could replace the bureaucratic super-state seated in Brussels.

On the other hand, increased economic isolationism from nationalist movements could threaten international businesses and financial markets. In the short term, markets would likely react negatively to added uncertainty.

The EU is a known commodity, even if imperfect, and markets like predictability. However, in the longer term, the markets could benefit from a once-again growing Europe. If a post-euro world returns continental Europe to competitive economic growth, it is very likely that the global economy will benefit.

Redenomination would entail two broad changes. This means adjusting present wages, prices, and other values to the new money on an approximately proportionate basis. Second, the international value of the currency would need to be priced into the foreign exchange forex markets. This is based on many factors, including the productive capacity of each national government and the relative risk of a devalued currency.

It is likely that many indebted countries with lots of foreign creditors, such as Greece, would try to redenominate to reduce their real repayment burden. One way to accomplish this is to redenominate and immediately begin strong inflation to reduce the purchasing power of the repaid debt.

Close historical parallels can be found after the collapse of the Austro-Hungarian Empire, which stood between and After the empire fell apart, many member countries hoped to retain the Austro-Hungarian krone as currency. Unfortunately, several irresponsible governments used highly expansionary monetary policies to pay off the high debts from World War I, triggering hyperinflation in Austria by the early s.

Slovenia, Hungary, and others experienced much of the same. By , each former member nation had to use a new currency often backed by gold or silver. If the only change was a replacement of the euro by competing national currencies, the abolition of the euro would only create real long-term changes in monetary policy , which is how central banks control the money supply and lending to create economic growth.

The eurozone was originally sold, in part, by the concept of creating a European counterpart to the U. Federal Reserve. Eliminating the euro would decentralize monetary authority back to the member nations. For example, a German central bank would control interest rates and the money supply in Germany while a Portuguese central bank would control them in Portugal.

Banks could recapitalize in their national currencies although they would likely have to keep more active foreign exchange balances for regional trade and reconciliation.