Sunday, November 20, 2011

On Technical Barriers to Leaving the Euro and Learning from Others’ Experience

When discussion turns to the possibility that some country might leave the euro, much is often made of the technical difficulties of introducing a new currency, especially of the months, even years, of planning that went into launching the euro in the first place. Sample: “Computers will have to be reprogrammed. Vending machines will have to be modified. Payment machines will have to be serviced to prevent motorists from being trapped in subterranean parking garages. Notes and coins will have to be positioned around the country.” (Joshua Chaffin in the Financial Times, quoting a 2007 paper by Barry Eichengreen.)

Yes, there would be technical difficulties. Still, lots of countries have switched currencies in the past. Sometimes the process has been planned and orderly, sometimes messy and chaotic. One way or another, the job gets done. Anyone who thinks technical problems pose insurmountable barriers needs to look at the imaginative, pragmatic devices that other countries have used to ease the transition from one currency to another. Here are three lessons from other countries’ experiences  that would be relevant to anyone now making plans to leave the euro. READ MORE>>>

1 comment:

  1. This was really a very good article. One of the best I've read on this subject.

    "What would motivate people to use the new currency? One way to bring it into circulation would be to introduce it first where people have no choice. For example, if Greece were to leave the euro area, it could begin by printing a new, temporary, Greek euro, which at first would be used only to pay government salaries, pensions, and interest on the national debt, and also be accepted for payment of taxes."

    Do you think it would be possible that the newly circulating currency has a value of zero?