A British charitable trust has offered a hefty reward for the best eurozone break-up plan. Their goal? Improve and influence policy though a 250,000 pound ($393,430) incentive prize.
As I read through the finalists’ plans, the unfathomable complexity of unraveling the euro became increasingly apparent because each proposal had a different but crucial focus:
- One plan emphasized reconfiguration through which stronger and weaker economies formed separate groups.
- A second said we should “unscramble the euro eggs” by establishing 2 new currencies, a stronger “new euro white” and a weaker “new euro yolk,” each with predetermined values to avoid currency flight.
- A third approach was most concerned with legal jurisdiction over assets and obligations. With 17 sovereign nations, who would have the final say?
- For another proposal, timing and the details that would be implemented after a sudden German/French declaration were described. This plan said secrecy would be paramount, then the announcement, and then a weekly time table.
- Finally, a fifth finalist said the key was focusing on how the weaker nations should “default” and “devalue.”
The winner will be announced on July 5.*
Fascinating but lengthy, the plans can be read from the links in this Guardian article. Also, if you are interested in other incentive prizes, here is a chart from The Economist.
An update: Here is information about the winning entry:
Submitted by Capital Economics, the plan focused on the exit of a weaker country. Quoted from the Wolfson website, here are some specifics:
“The team’s submission, Leaving the euro: A practical guide, centres on the departure of a single weak member such as Greece. It suggests that:-
- A new currency is introduced at parity with the Euro on day 1 of an exit.
- All wages, prices, loans and deposits are redenominated into it 1 for 1.
- Euro notes and coins would remain in use for small transactions for up to six months.
- The exiting country would immediately announce a regime of inflation targeting, adopt a set of tough fiscal rules, monitored by a body of independent experts, outlaw wage indexation, and announce the issue of inflation-linked government bonds.”