A thread on leaving of the euro.
Over the years, I have turned to a full-blown euro-skeptic. If one figure could be used to describe my transformation, it would be this. 👇
Simply put, euro has been an economic menace. 1/24
As everything starts with the legal/political arguments, for the euro-exit, there are three:
1. National emergency
2. Other force majeure
3. A change or violation of the Acts of the Treaties and/or principles of the Eurozone.
Other force majeure refer to events that are abnormal, unforeseeable and beyond the control... 3/
The most credible and legally viable path out of the euro for any member is based on the transition of the currency union into something different than the one that member states originally joined.
This is exactly what the #coronafund entails. 4/
There cannot be any referendum, except under the cover of capital controls, because it would most likely lead to possible drastic capital outflows.
In the preparations, the government needs...5/
First, the economic and political consequences of exit need to be evaluated, creating a base for later public communications as well as negotiations.
Second, initial assessments of ways to immediately replace the financial functions... 6/
Third, a preliminary draft of legal changes needed as well as drafting initial measures to be taken including... 7/
Fourth, a list of issues to preferably agree with various Eurozone authorities in order to achieve as amenable an exit as possible. These would include... 8/
In the practical implementation, the country needs to find answers to the following three questions: 9/
2. Is economic and political retaliation on the part of the remaining MU countries and/or authorities likely?
The first one is the biggest question, as building a new payment system takes time. However, the option is to operate...
It's likely that the exiting country would be allowed to continued to use...12/
However, if this would to happen, the exiting country would need to operate with alternative means of payment for around a year. 13/
During the planning of Grexit in the spring/summer of 2015, stores and banks were ready to start to issue their own debit/credit cards in a matter of weeks. 14/
In the current situ, retaliation against a country leaving the euro is unlikely, or at least it would be highly ill-advised, because in then the country could also leave the EU. 15/
There is no clause in European treaties allowing the expulsion of a country from the EU or the EMU. 16/
This also applies to all sovereign debt that does not hold the Collective Action Clause (CAC). All debt under the CAC would need to... 17/
The lex monetae would also be used to redenominate all corporate debt that falls under national jurisdiction to the new domestic currency.
The central bank of the exiting country would instantly start to... 18/
To ensure convertibility of the new currency, the CB would need to establish and retain a foreign exchange reserve backed by a system of swap agreements with other friendly central banks. 19/
Banks would be legally forced to redenominate, with immediate effect, at least part of their balance sheet into the new national currency. 20/
1) Deciding the legal argument for the exit.
2) Secret planning
3) Guaranteeing the functioning of the payment and banking systems.
4) Establishing a domestic authority (CB) to ensure the liquidity of the banks.