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…but not impossible. Roger Bootle, winner of the Wolfson Economics Prize to create a blueprint for dismantling the Euro, has written a meticulous instruction manual

This article was first published in the October 2012 International edition of Accounting and Business magazine.

One of the cardinal rules of fire fighting is always identify your exit before entering a blaze. Several Eurozone nations must wish they had followed this advice when joining the continent’s bold experiment in currency union. Since the Euro was intended to be a club that none could leave, no emergency escape plans were ever made.



The first merit of Bootle’s 156-page handbook is that it doesn’t sugar-coat the risks. Any nation wishing to exit the crumbling structure will confront a huge range of dangers. For a start, all hell would break loose if news of an imminent departure were to leak to the press. Citizens would make a beeline for the bank and immediately withdraw their savings, provoking an instant financial crisis. The replacement currency would plunge on the foreign exchange markets – in the case of Greece possibly by up to 50%.



One ironic effect of leaving the zone would also be to boost the real value of the nation’s foreign debts. So far from solving a debt crisis, leaving the Euro would actually make matters worse – at least in the short term.


Keep it under your hat

The first challenge is to keep secession plans secret for as long as possible. Ideally, a momentous decision like leaving the Euro should be democratic, taking the pulse of all political parties as well as the public.




Closing the hole in the wall

Once the cat is out of the bag, capital and banking controls would be needed to prevent money fleeing the country. ‘Cash machines… would need to be shut down,’ advises Bootle’s plan. ‘Otherwise, realising that the Euro would become more valuable than the drachma, most Greek residents [for example] would attempt to withdraw as many Euros as possible from their bank accounts.’


The most obvious practical issue in leaving the Euro is that of minting new notes and coins. Since this might take months, the departing country would be left in limbo. One stopgap solution would be to stamp existing Euro notes with a drachma symbol. This is not an option favoured by Bootle. Instead, the Capital Economics plan argues that a country like Greece could largely do without cash for a while.

A recent survey by the European Central Bank showed that cash accounted for just 5% of total transactions for the majority of businesses. For the small amounts of cash that are needed, the Euro could continue to be used until a new currency was ready, Bootle argues.

Another question is the potentially inflationary threats posed by a new currency. Retailers might take advantage of the changeover to raise prices. Many shoppers suspected this happened when the British shifted to a decimal system in 1971. To avoid such covert hikes, Bootle recommends introducing the new currency at parity to the Euro, so an item that used to sell for 1.5 Euros would sell for 1.5 drachma, although the new currency’s real value could soon fall sharply.


Return to growth


The Wolfson Economics Prize ended up underlining many of the dangers of a Euro split. But thanks to the Tory peer, discussing the practicalities of a breakup is no longer a taboo.

Christopher Alkan, journalist



Last updated: 9 Sep 2014