For a country to leave the currency, it would first have to suspend democracyby Wolfgang Munchau / April 25, 2012 / Leave a comment
Published in February 2012 issue of Prospect Magazine
A replica of the last edition of the drachma in central Athens—but could the currency make a comeback if Greece leaves the euro?
How do you get out of the eurozone? Leaving a monetary union is about the messiest thing that a country can do, short of entering into a war. But what if you have to leave the eurozone? Greece might soon be in that situation—so too Portugal.
Assume that something goes wrong in Greece. Perhaps Lucas Papademos cannot hold his quarrelling coalition together. Perhaps Greece will not be able, or willing, to comply with the austerity demands of the International Monetary Fund and the European Union. Perhaps Greece and the banks cannot agree a deal to restructure the debt. Countless other things may happen: an outbreak of violence, the murder of a foreign diplomat—the kind of event that used to trigger a war, and that would now trigger an exit from the euro. What then?
First, it is legally not supposed to happen. The euro is the currency of the EU. Just as Scotland cannot break out of the pound, Greece cannot break out of the euro. Britain has an opt-out, and so does Denmark, but for the others, the euro is obligatory. Once you are in, you are in. The only way to get out is to leave the EU, which is possible under the Lisbon Treaty. So the strict legal answer is that, to leave the euro, Greece would have to leave the EU.
European law has many trapdoors. A European official once told me that Greece could leave the EU on Sunday night, and re-enter on Monday morning. Sure, this is not what Article 50 of the Treaty on European Union intended, but who knows what the European Court of Justice might decide if such a case landed on the bench.
At this point, we have to assume a number of different scenarios. Is this exit agreed with the others, and if so, will they support it financially? Or is it a unilateral act, which Angela Merkel learns about in the newspapers? An agreed exit could come about w…