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FACTDROP: Plan for a graceful Eurozone exit for Greece wins Economics prize


Plan for a graceful Eurozone exit for Greece wins Economics prize

Πηγή: The Economic Times
By New York Times
July 6 2012

LONDON: The new Greek government of Antonis Samaras insists that Greece will stay in the eurozone.

But if Greece does reach the point when it must ask hard questions about how to return to the drachma, Samaras might save his technocrats weeks of work and instead download "Leaving the Euro: A Practical Guide."

The report, by Roger Bootle and a team of economists at Capital Economics in London, was announced Thursday as the winning entry in a hard-fought contest sponsored by Simon Wolfson, the British businessman and euro skeptic, to see who could come up with the most elegant solution for how the eurozone might come part.

The incentive: 250,000 pounds, or $388,000, no small amount in these low-bonus times.

Many economists and analysts submitted entries - including an 11-year-old Dutch boy. But it was Bootle and his team who 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 before its exit. Eurozone officials would be notified of the country's plans just three days before the announcement, which would be followed by the closing 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 Bootle's arguments are new, they do represent a widely held view that while a eurozone exit would be initially very painful for the departing country because inflation would shoot up, the cheaper currency and the ability to write off high levels of debt would pay off in the end.

Bootle and others pointed out that there had been many currency breakups in the past and that normalcy returned after a time.

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