How to break up a currency union

Anders Aslund surveys examples of currency unions fragmenting and considers the mechanics of how a Euro breakup might happen: The ideal model for a dissolution of a monetary union is the partition of Czechoslovakia in 1993. It was amicable and orderly. And it was fast and simple. The euro members should opt for these properties. ...

By , a professor at Indiana University’s Hamilton Lugar School of Global and International Studies.

Anders Aslund surveys examples of currency unions fragmenting and considers the mechanics of how a Euro breakup might happen:

Anders Aslund surveys examples of currency unions fragmenting and considers the mechanics of how a Euro breakup might happen:

The ideal model for a dissolution of a monetary union is the partition of Czechoslovakia in 1993. It was amicable and orderly. And it was fast and simple. The euro members should opt for these properties. When the need for dissolution of the euro area appears inevitable, all countries should agree on an early exit date.

It is not necessary to print bank notes in advance. Presumably some euro countries have stored their old bank notes and can circulate them again. Alternatively, it is enough to stamp bank notes in each nation as national for a month or two, as the Czechs and Slovaks did, because counterfeiting currencies usually takes time. Then new bank notes can be printed and delivered.

Aslund warns that it’s time to "think the unthinkable" and at least prepare for the Eurozone’s collapse. It all seems sensible. But I don’t see how key European institutions or major Euro states could practically follow his advice. Any serious planning would inevitably leak and hasten the outcome that everyone appears determined to avoid.

David Bosco is a professor at Indiana University’s Hamilton Lugar School of Global and International Studies. He is the author of The Poseidon Project: The Struggle to Govern the World’s Oceans. Twitter: @multilateralist

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