Spinning a Scenario of Euro Zone's Unraveling
* by LANDON THOMAS Jr. NY Times * July 5, 2012 LONDON The new Greek government of Antonis Samaras insists that Greece will stay in the euro zone. But if Greece does soon reach the point when it must ask the hard questions about how to return to the drachma, Mr. Samaras might save his technocrats weeks of work and instead download <http://www.policyexchange.org.uk/images/WolfsonPrize/wolfson%20economics%20 prize%20winning%20entry.pdf> Leaving the Euro: A Practical Guide . The report, by Roger Bootle and a team of economists at Capital Economics in London, was announced on Thursday as the winning entry in a hard-fought contest sponsored by the British businessman and euro-doubter Simon Wolfson to see who could come up with the most elegant solution for how the euro zone might unravel. The incentive: £250,000, or $388,000, no small amount in these low-bonus times. Many economists and analysts submitted entries including a 10-year-old Dutch boy <http://policyexchange.org.uk/images/WolfsonPrize/wep%20special%20entry%20-% 20jurre%20hermans.pdf> . But it was Mr. Bootle and his team that took the prize, and not surprisingly they focused on Greece, laying out in detail how the country might go off on its own and cause the least disruption in the process. For starters, the departing country would need to meet in secret a month prior to its exit. Euro zone officials would be notified of the countrys plans just three days prior to the announcement, which would be followed by the closure of banks and capital markets. The new currency could be converted to euros on a one-for-one basis and then the currency would be allowed to devalue. While none of Mr. Bootles arguments are new, they do represent a widely held view that while a euro zone exit would be initially very painful for the departing country because inflation would spiral upward, the cheaper currency and the ability to write off high levels of debt would pay off in the end. Mr. Bootle and others have pointed out that there have been many currency breakups in the past and that normalcy returns after a time.
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