£250,000 get-out-of-the-euro prize

A £250,000 prize has been offered for the best method of enabling a country to leave the euro.

The prize - the second-biggest for economists after the Nobel - was offered by Conservative peer and major party donor Lord Wolfson, backed by the Policy Exchange thinktank.

It comes ahead of crunch meetings in Brussels this weekend of European Union leaders and finance ministers, including David Cameron and George Osborne, who will try to thrash out a deal to stabilise the eurozone.

A report from thinktank Open Europe suggested today that as much as 370 billion euros (£323 billion) will be needed to recapitalise European banks as part of a "painful, but necessary eurozone debt restructuring" which could include a partial 60% default for Greece.

Open Europe's head of economic research Raoul Ruparel said: "The EU's banking system needs to be fundamentally recapitalised. But this must come with strong conditions attached, with banks being allowed to fail in an orderly manner.

"A proper recapitalisation is still far cheaper than allowing many banks to continue to hide behind government and central bank bailouts, which only increases the ultimate cost of this crisis.

"Restructuring and recapitalisation could allow the eurozone to muddle through longer than many expect, but the eurozone's deep-rooted structural flaws will remain, meaning that another crisis could well be just around the corner.

"In order to survive long term, fiscal union or revised membership remains the stark choice facing the eurozone."

Lord Wolfson, the chief executive of clothing retailer Next, said a disorderly exit by one or more of the 17 member-states could threaten European savings, employment and the stability of the international banking system.

The aim of the prize is to ensure that thought is given to the process of restructuring the euro into more stable currencies and what a post-single currency eurozone might look like.

He said: "The stakes are enormous. The future of the world economy will, in large part, be governed by what happens over the next few years in Europe.

"I, along with most European businessmen, hope that the eurozone will stabilise, but in the event it does not, Europe must not sleepwalk into a policy vacuum.

"This prize aims to incentivise the world's brightest economic minds to help fill that policy void: their endeavours may well prevent Europe from descending into a financial chaos that would destroy savings, jobs, and social cohesion."

The deadline for submissions will be January 31. Entrants will be judged by a panel of leading academic economists.

PA