Eurozone exit plan wins Wolfson Economics Prize

 

The greatest threat to the future of the single currency is that Greece could exit the euro and prosper so much that other nations would want to leave too, said Roger Bootle, of Capital Economics today.

The economic consultancy, founded by Mr Bootle, was awarded the £250,000 Wolfson prize for its blueprint showing how Greece and other troubled eurozone nations could exit the single currency with the minimum of economic disruption and also, in the process, lay the foundations for future growth.

Capital Economics recommended that the key officials of a nation planning to exit should meet in secret one month before the departure is announced to make preparations. They should inform their eurozone partners and international bodies like the IMF no sooner than three days before. Then they should re-introduce a new currency overnight, impose border controls and announce their intention to restructure national debts.

Mr Bootle said that, if executed correctly, the pain of exit would relatively soon be replaced by a return to growth, something that would encourage other distressed states still in the currency zone to exit too. “The biggest danger of contagion will be if Greece makes a success of leaving the union” said Mr Bootle.

Many economists have argued that any nation that crashed out of the eurozone would face a collapse in living standards and financial chaos. But Mr Bootle insisted these problems could be mitigated. “Overall, our analysis has revealed a series of very tricky issues which any exiting country would need to face, but all of these difficulties can be overcome” he said.

The competition to design a practical exit strategy for eurozone states was launched last November by Lord Wolfson, the chief executive of Next and a prominent Conservative supporter. It attracted more than 400 entrants from around the world. The judges said that the Capital Economic plan was the “most credible solution”.

Other plans which made the shortlist along with Capital Economics were submitted by Jens Nordvig and Nick Firoozye from Nomura Securities, Neil Record from Record Currency Management, Jonathan Tepper from Variant Perception and Cathy Dobbs, a private investor.

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