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The future of the euro — what happens if a Member State leaves?

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The continued viability of the Eurozone as a single currency area is challenged from time to time. Some doubt the ability of Italy and other Member States to remain in the zone, given their difficulties in complying with the applicable budgetary rules. Even the French Prime Minister has commented that life was sometimes easier with the franc. This article considers some of the consequences which may ensue in the event that a Member State felt compelled to seek an exit from the Eurozone, and to reintroduce its own national currency. The Treaty does not legislate for this type of situation and any such attempt would clearly cause severe strains at a political level. But it would also have a major impact on the financial markets. In particular, there may be doubts about the currency in which continuing monetary obligations should be settled. This article seeks to analyze the legal issues which would arise in this context.

Suggested Citation

  • Proctor, Charles, 2007. "The future of the euro — what happens if a Member State leaves?," Journal of Financial Transformation, Capco Institute, vol. 19, pages 141-157.
  • Handle: RePEc:ris:jofitr:1405
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    1. Alberto Alesina & Robert J. Barro & Silvana Tenreyro, 2003. "Optimal Currency Areas," NBER Chapters,in: NBER Macroeconomics Annual 2002, Volume 17, pages 301-356 National Bureau of Economic Research, Inc.
    2. Michael D. Bordo & Lars Jonung, 1999. "The Future of EMU: What Does the History of Monetary Unions Tell Us?," NBER Working Papers 7365, National Bureau of Economic Research, Inc.
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    1. The future of the euro — what happens if a Member State leaves?
      by brianmlucey in Brian M. Lucey on 2015-06-28 00:08:46

    More about this item

    Keywords

    Monetary unions; failures of monetary unions;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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