Sunday, August 26, 2012

Who should leave the eurozone?

In a recent issue of The Economist, a fictional "lost" memo to Angela Merkel is published which reveals contingency plans for the breakup of the euro.  The memo considers two possible exit groups: 1. Greece alone, and 2. Greece, Portugal, Ireland, Cyprus, and Spain.  The memo outlines how a currency exit could be accomplished and how much it would cost. The coffee mug stain is a nice touch.

The Economist (8-11-2012 ) "The Merkel memorandum"

This memo follows many of the suggestions presented in the winning submission for the 2012 Wolfson Economics Prize, "Leaving the Euro a Practical Guide" by lead author Roger Bootle. In the following interview, Bootle explains why he thinks the eurozone will break up. He goes a step further and argues that the eurozone should break up.

Bootle touches briefly on the possibility of France and Italy leaving the eurozone too, so that only northern countries are left. Many others have suggested that the northern countries in the eurozone (including Germany, Netherlands, and Finland) should form their own currency zone. Here is one such article.

NYT (6-26-2012) "To save the euro, (Germany should) leave it "

Discussion Questions for Students:
1. Which countries if any do you think should leave the eurozone?
2. How might a big devaluation of reinstated currencies in Greece, Portugal, Spain, and possibly Italy, affect your industry?

For the truly dedicated here is a link to the winner of the Wolfson Economics Prize MMXII:

"Leaving the Euro a Practical Guide" by Capital Economics, Lead author: Roger Bootle