In the publication series “Europa briefng”, the Bertelsmann Stiftung and the Jacques Delors Institut – Berlin cover key topics of European politics and present possible scenarios: What is the problem? What might happen next? And what can politics do now?
You will fnd all the publications from the joint project here: www.strengthentheeuro.eu
Project team Imprint
Prof. Dr. Henrik Enderlein Heidi Marleen Kuhlmann © 2017 Bertelsmann Stiftung Director, Project Manager European Politics and Jacques Delors Institut – Berlin Jacques Delors Institut – Berlin, and Communication, Vice President and Professor Jacques Delors Institut – Berlin Bertelsmann Stiftung of Political Economy, Carl-Bertelsmann-Straße 256 Hertie School of Governance Max Emanuel Mannweiler 33311 Gütersloh, Germany Project Manager European Politics Tel. +49 5241 81-81183 Joachim Fritz-Vannahme and Communication www.bertelsmann-stiftung.de Director, Jacques Delors Institut – Berlin “Europe’s Future” programme, Jacques Delors Institut – Berlin Leaving the euro: Bertelsmann Stiftung Katharina Späth Pariser Platz 6 Project Manager, 10117 Berlin, Germany Dr. Anna auf dem Brinke “Europe’s Future” programme, Tel. +49 30 467 260-905 Research Fellow, Bertelsmann Stiftung www.delorsinstitut.de An emergency exit Jacques Delors Institut – Berlin Philipp Ständer Translation Sabine Feige Research Fellow, ETC Europe scrl, Brussels Project Assistant, Jacques Delors Institut – Berlin for the currency “Europe’s Future” programme, Edit Bertelsmann Stiftung David Gow, Edinburgh
Dr. Katharina Gnath Design union? Senior Project Manager, ressourcenmangel “Europe’s Future” programme, an der Panke GmbH, Berlin Bertelsmann Stiftung The euro does not provide its members with any option to leave. This protects the Production common currency against speculative attacks on the one hand. The euro crisis Jörg Haas, Author druck.haus rihn gmbh, Blomberg demonstrated on the other hand how difcult it is for Eurozone countries to con Research Fellow, structively solve economic and fscal policy conficts among themselves. Why was Jacques Delors Institut – Berlin Persons responsible according to the euro designed as a oneway street? What would be the consequences of an exit the German Press Law option? And what alternatives are there to an exit? Prof. Dr. Henrik Enderlein,
Joachim Fritz-Vannahme
in Le Parisien on 30 April 2017 April 30 on Parisien Le in 2015 July 12 on Reuters agency news the to according 2015 July 11 on paper position a in
National Front party French the of Chairwoman Pen, Le Marine France of Republic the of President Hollande, François Finance of Ministry Federal German
engage in international trade.” international in engage […].” progresses longer no and retreats years.” fve next the least
on 6 February 2017 February 6 on
Parliament European the at hearing a in afect daily purchases, but only the large companies that that companies large the only but purchases, daily afect that Europe it’s case that in But zone. euro at over […] necessary, if restructuring, debt possible with
Mario Draghi, President of the European Central Bank Bank Central European the of President Draghi, Mario
currency to a common currency. A currency that does not not does that currency A currency. common a to currency the in not Greece or zone euro the in Greece Eurozone, the from time-out a on negotiations swift ofered
currency. That means converting the euro from a single single a from euro the converting means That currency. is There Grexit. no or Grexit a only is there be should Greece upfront, ensured be cannot perspective Questo è il trattato. This is the Treaty.“ the is This trattato. il è Questo
“I will demand from the EU that we gain control over our our over control gain we that EU the from demand will “I Grexit, temporary as thing such no is “There implementation credible a and sustainability debt case, “In irreversible. is euro The irrevocabile. è „L’euro
policy monetary a pursue cannot it
more, What’s market. global the on
cheaply more products own its sell
cannot devalue its currency so as to to as so currency its devalue cannot
economic crisis. A Eurozone country country Eurozone A crisis. economic
of the currency union to escape an an escape to union currency the of still available. available. still
their own. Consequently, the will of of will the Consequently, own. their members for difcult be can It lems. billion euro euro billion 373 with euro,
that they had a democratic mandate of of mandate democratic a had they that - prob raises also irreversibility that billion billion 500 to up lend can
The euro crisis showed, however, however, showed, crisis euro The a haircut for Greek debt, pointing out out pointing debt, Greek for haircut a sharp rise in infation. infation. in rise sharp ESM The illiquid. become
Other European governments rejected rejected governments European Other but this would also lead to a a to lead also would this but through loans if they risk to to risk they if loans through
currency union needs an exit option. option. exit an needs union currency exits. further on Greeks wanted to remain in the euro. euro. the in remain to wanted Greeks exports more competitive, competitive, more exports countries to be supported supported be to countries
been repeatedly discussed whether the the whether discussed repeatedly been bet and countries crisis from fee to same time, however, two-thirds of of two-thirds however, time, same vis the euro and would make make would and euro the vis It allows for individual individual for allows It
is why – despite all the risks – it has has it – risks the all despite – why is enticing it fnd would participants reject the EU bailout in 2015. At the the At 2015. in bailout EU the reject cy could freely devalue vis-à- devalue freely could cy countries. Eurozone the by
This decisions. these of costs the cover market Capital . clear majority of the people voted to to voted people the of majority clear of fxed exchange rates exchange fxed of - curren new A supply. money institution that is controlled controlled is that institution
to countries Eurozone other obligate a than credible more be efectively leave the euro. the leave efectively a where Greece of case the in clearly system the control and mestically fnancial a is ESM The
policy. On the other, a country cannot cannot country a other, the On policy. hardly would union currency The and thus thus and a troduce most seen was This democracies. parallel currency parallel - do liabilities its settle can it Mechanism (ESM) Mechanism
ably like to freely choose its economic economic its choose freely to like ably possible. be suddenly would assets - in to government the forced have national for much too been has euro IOUs, government-backed Stability European
- understand would country sovereign fnancial euro-denominated on the supply of money, which would would which money, of supply the the leaving and reforms painful issuing by example for crisis,
programmes? On the one hand, a a hand, one the On programmes? losses related thus and departures It could have cut of Greek banks from from banks Greek of cut have could It implementing between choice The allel currency in an economic economic an in currency allel the exchange rate. rate. exchange the
(ESM) (ESM) Additional union. currency entire Bank took on a key role in the crisis: crisis: the in role key a on took Bank European Stability Mechanism Stability European par- a introduces state a If abandon to bank central
under reforms implementing and back the destabilise would Eurozone the framework, the European Central Central European the framework, cases. some in evil Parallel currency Parallel pressure may force the the force may pressure
cutting of tired grows population the from country a of departure The there was no clear political and legal legal and political clear no was there lesser the be might union currency the rency. However, persistent persistent However, rency.
and recover not does country zone euro exit without an EU exit. Since Since exit. EU an without exit euro leaving whether on and appropriate is one may refer to a Quadriga. Quadriga. a to refer may one - cur selling or buying by it
- Euro a if done be to is What stability. currency. their weakening tentionally and the European Treaties foresee no no foresee Treaties European the and cuts budget of level what on raged has ments. If the ESM is included, included, is ESM the If ments. stabilise to has bank central
is difcult to combine with European European with combine to difcult is - in by trade in advantages unfair any country out of the common currency currency common the of out country debate however, crisis, the after and require- reform with pliance the low, too or high too
The dilemma: National sovereignty sovereignty National dilemma: The create not do states member the that There is no obvious way to kick a a kick to way obvious no is There During reforms. economic extensive com- check and crisis in markets view this rate as as rate this view markets
common market in turn upon the fact fact the upon turn in market common together. Eurozone the held has tion and consolidation budget for return countries with programmes pre-fxed level. If fnancial fnancial If level. pre-fxed
this “internal devaluation”. “internal this the and market; common one upon - op exit ofcial any of absence The in loans bridging providing grammes out out bail joint the negotiate between currencies at a a at currencies between
that way. The population sufers from from sufers population The way. that exchanges such exchanges; economic - pro these with crisis, in countries who ECB the and IMF the to keep the exchange rate rate exchange the keep to
and make its exports more attractive attractive more exports its make and upon founded is peace where EU the . the of conditions for ESM the as such funds bailout Troika Commission, European the of An agreement among states states among agreement An
option than to drastically reduce wages wages reduce drastically to than option of logic core the with line in is That in the Eurozone by accepting the the accepting by Eurozone the in up set Eurozone the Instead, option. Name for the representatives representatives the for Name exchange rates exchange
other no has often crisis a in country leave. to option no is There versible. stay to decided ultimately government exit no be could there that ment Troika fxed of System
late investment. Instead, a Eurozone Eurozone a Instead, investment. late - irre is euro the of introduction the simultaneously everywhere. The Greek Greek The everywhere. simultaneously agree- in were members Eurozone
stimu- to order in needs its to tailored that stipulate Treaties European The the people could not be implemented implemented be not could people the all crisis, euro the of start the At
handled possible exits? exits? possible handled as a one-way street? one-way a as
How has the Eurozone Eurozone the has How Why was the euro designed euro the was Why In the publication series “Europa briefng”, the Bertelsmann Stiftung and the Jacques Delors Institut – Berlin cover key topics of European politics and present possible scenarios: What is the problem? What might happen next? And what can politics do now?
You will fnd all the publications from the joint project here: www.strengthentheeuro.eu
Project team Imprint
Prof. Dr. Henrik Enderlein Heidi Marleen Kuhlmann © 2017 Bertelsmann Stiftung Director, Project Manager European Politics and Jacques Delors Institut – Berlin Jacques Delors Institut – Berlin, and Communication, Vice President and Professor Jacques Delors Institut – Berlin Bertelsmann Stiftung of Political Economy, Carl-Bertelsmann-Straße 256 Hertie School of Governance Max Emanuel Mannweiler 33311 Gütersloh, Germany Project Manager European Politics Tel. +49 5241 81-81183 Joachim Fritz-Vannahme and Communication www.bertelsmann-stiftung.de Director, Jacques Delors Institut – Berlin “Europe’s Future” programme, Jacques Delors Institut – Berlin Leaving the euro: Bertelsmann Stiftung Katharina Späth Pariser Platz 6 Project Manager, 10117 Berlin, Germany Dr. Anna auf dem Brinke “Europe’s Future” programme, Tel. +49 30 467 260-905 Research Fellow, Bertelsmann Stiftung www.delorsinstitut.de An emergency exit Jacques Delors Institut – Berlin Philipp Ständer Translation Sabine Feige Research Fellow, ETC Europe scrl, Brussels Project Assistant, Jacques Delors Institut – Berlin for the currency “Europe’s Future” programme, Edit Bertelsmann Stiftung David Gow, Edinburgh
Dr. Katharina Gnath Design union? Senior Project Manager, ressourcenmangel “Europe’s Future” programme, an der Panke GmbH, Berlin Bertelsmann Stiftung The euro does not provide its members with any option to leave. This protects the Production common currency against speculative attacks on the one hand. The euro crisis Jörg Haas, Author druck.haus rihn gmbh, Blomberg demonstrated on the other hand how difcult it is for Eurozone countries to con Research Fellow, structively solve economic and fscal policy conficts among themselves. Why was Jacques Delors Institut – Berlin Persons responsible according to the euro designed as a oneway street? What would be the consequences of an exit the German Press Law option? And what alternatives are there to an exit? Prof. Dr. Henrik Enderlein,
Joachim Fritz-Vannahme
according to the news agency Reuters on 12 July 2015 July 12 on Reuters agency news the to according 2015 July 11 on paper position a in in Le Parisien on 30 April 2017 April 30 on Parisien Le in
François Hollande, President of the Republic of France France of Republic the of President Hollande, François Finance of Ministry Federal German National Front party French the of Chairwoman Pen, Le Marine
retreats and no longer progresses […].” […].” progresses longer no and retreats years.” fve next the least engage in international trade.” international in engage
on 6 February 2017 February 6 on
Parliament European the at hearing a in euro zone. But in that case it’s Europe that that Europe it’s case that in But zone. euro at over […] necessary, if restructuring, debt possible with afect daily purchases, but only the large companies that that companies large the only but purchases, daily afect
Mario Draghi, President of the European Central Bank Bank Central European the of President Draghi, Mario
Greece in the euro zone or Greece not in the the in not Greece or zone euro the in Greece Eurozone, the from time-out a on negotiations swift ofered currency to a common currency. A currency that does not not does that currency A currency. common a to currency
there is only a Grexit or no Grexit. There is is There Grexit. no or Grexit a only is there be should Greece upfront, ensured be cannot perspective currency. That means converting the euro from a single single a from euro the converting means That currency. Questo è il trattato. This is the Treaty.“ the is This trattato. il è Questo
“There is no such thing as temporary Grexit, Grexit, temporary as thing such no is “There implementation credible a and sustainability debt case, “In “I will demand from the EU that we gain control over our our over control gain we that EU the from demand will “I irreversible. is euro The irrevocabile. è „L’euro
policy monetary a pursue cannot it
more, What’s market. global the on
cheaply more products own its sell
cannot devalue its currency so as to to as so currency its devalue cannot
economic crisis. A Eurozone country country Eurozone A crisis. economic
of the currency union to escape an an escape to union currency the of still available. available. still
their own. Consequently, the will of of will the Consequently, own. their members for difcult be can It lems. billion euro euro billion 373 with euro,
that they had a democratic mandate of of mandate democratic a had they that - prob raises also irreversibility that billion billion 500 to up lend can
The euro crisis showed, however, however, showed, crisis euro The a haircut for Greek debt, pointing out out pointing debt, Greek for haircut a sharp rise in infation. infation. in rise sharp become illiquid. The ESM The illiquid. become
Other European governments rejected rejected governments European Other but this would also lead to a a to lead also would this but through loans if they risk to to risk they if loans through
currency union needs an exit option. option. exit an needs union currency exits. further on Greeks wanted to remain in the euro. euro. the in remain to wanted Greeks exports more competitive, competitive, more exports countries to be supported supported be to countries
been repeatedly discussed whether the the whether discussed repeatedly been bet and countries crisis from fee to same time, however, two-thirds of of two-thirds however, time, same vis the euro and would make make would and euro the vis It allows for individual individual for allows It
is why – despite all the risks – it has has it – risks the all despite – why is enticing it fnd would participants reject the EU bailout in 2015. At the the At 2015. in bailout EU the reject cy could freely devalue vis-à- devalue freely could cy by the Eurozone countries. countries. Eurozone the by
This decisions. these of costs the cover market Capital . clear majority of the people voted to to voted people the of majority clear of fxed exchange rates exchange fxed of - curren new A supply. money institution that is controlled controlled is that institution
to countries Eurozone other obligate a than credible more be efectively leave the euro. the leave efectively a where Greece of case the in clearly system the control and mestically The ESM is a fnancial fnancial a is ESM The
policy. On the other, a country cannot cannot country a other, the On policy. hardly would union currency The a troduce most seen was This democracies. and thus thus and parallel currency parallel - do liabilities its settle can it Mechanism (ESM) Mechanism
ably like to freely choose its economic economic its choose freely to like ably possible. be suddenly would assets have forced the government to in to government the forced have national for much too been has euro - IOUs, government-backed European Stability Stability European
- understand would country sovereign fnancial euro-denominated on the supply of money, which would would which money, of supply the the leaving and reforms painful issuing by example for crisis,
programmes? On the one hand, a a hand, one the On programmes? losses related thus and departures It could have cut of Greek banks from from banks Greek of cut have could It implementing between choice The allel currency in an economic economic an in currency allel the exchange rate. rate. exchange the
(ESM) (ESM) Additional union. currency entire Bank took on a key role in the crisis: crisis: the in role key a on took Bank European Stability Mechanism Stability European par- a introduces state a If central bank to abandon to bank central
under reforms implementing and back the destabilise would Eurozone the framework, the European Central Central European the framework, cases. some in evil Parallel currency Parallel pressure may force the the force may pressure
cutting of tired grows population the from country a of departure The there was no clear political and legal legal and political clear no was there lesser the be might union currency the rency. However, persistent persistent However, rency.
and recover not does country zone euro exit without an EU exit. Since Since exit. EU an without exit euro leaving whether on and appropriate is one may refer to a Quadriga. Quadriga. a to refer may one it by buying or selling cur selling or buying by it -
- Euro a if done be to is What stability. currency. their weakening tentionally and the European Treaties foresee no no foresee Treaties European the and cuts budget of level what on raged has ments. If the ESM is included, included, is ESM the If ments. central bank has to stabilise stabilise to has bank central
is difcult to combine with European European with combine to difcult is - in by trade in advantages unfair any country out of the common currency currency common the of out country debate however, crisis, the after and require- reform with pliance too high or too low, the low, too or high too
The dilemma: National sovereignty sovereignty National dilemma: The create not do states member the that There is no obvious way to kick a a kick to way obvious no is There During reforms. economic extensive com- check and crisis in markets view this rate as as rate this view markets
common market in turn upon the fact fact the upon turn in market common tion has held the Eurozone together. Eurozone the held has tion and consolidation budget for return
countries with programmes pre-fxed level. If fnancial fnancial If level. pre-fxed
this “internal devaluation”. “internal this the and market; common one upon The absence of any ofcial exit op exit ofcial any of absence The in loans bridging providing grammes - out out bail joint the negotiate between currencies at a a at currencies between
economic exchanges; such exchanges exchanges such exchanges; economic that way. The population sufers from from sufers population The way. that - pro these with crisis, in countries the IMF and the ECB who ECB the and IMF the
to keep the exchange rate rate exchange the keep to
the EU where peace is founded upon upon founded is peace where EU the and make its exports more attractive attractive more exports its make and conditions of the the of conditions for ESM the as such funds bailout . Troika of the European Commission, European the of
An agreement among states states among agreement An
That is in line with the core logic of of logic core the with line in is That option than to drastically reduce wages wages reduce drastically to than option in the Eurozone by accepting the the accepting by Eurozone the in up set Eurozone the Instead, option. Name for the representatives representatives the for Name exchange rates exchange
There is no option to leave. leave. to option no is There versible. country in a crisis often has no other no has often crisis a in country government ultimately decided to stay stay to decided ultimately government exit no be could there that ment
Troika fxed of System
the introduction of the euro is irre is euro the of introduction the late investment. Instead, a Eurozone Eurozone a Instead, investment. late - simultaneously everywhere. The Greek Greek The everywhere. simultaneously agree- in were members Eurozone
The European Treaties stipulate that that stipulate Treaties European The tailored to its needs in order to stimu- to order in needs its to tailored the people could not be implemented implemented be not could people the all crisis, euro the of start the At
handled possible exits? exits? possible handled as a one-way street? one-way a as
How has the Eurozone Eurozone the has How Why was the euro designed euro the was Why In the publication series “Europa briefng”, the Bertelsmann Stiftung and the Jacques Delors Institut – Berlin cover key topics of European politics and present possible scenarios: What is the problem? What might happen next? And what can politics do now?
You will fnd all the publications from the joint project here: www.strengthentheeuro.eu
Project team Imprint
Prof. Dr. Henrik Enderlein Heidi Marleen Kuhlmann © 2017 Bertelsmann Stiftung Director, Project Manager European Politics and Jacques Delors Institut – Berlin Jacques Delors Institut – Berlin, and Communication, Vice President and Professor Jacques Delors Institut – Berlin Bertelsmann Stiftung of Political Economy, Carl-Bertelsmann-Straße 256 Hertie School of Governance Max Emanuel Mannweiler 33311 Gütersloh, Germany Project Manager European Politics Tel. +49 5241 81-81183 Joachim Fritz-Vannahme and Communication www.bertelsmann-stiftung.de Director, Jacques Delors Institut – Berlin “Europe’s Future” programme, Jacques Delors Institut – Berlin Leaving the euro: Bertelsmann Stiftung Katharina Späth Pariser Platz 6 Project Manager, 10117 Berlin, Germany Dr. Anna auf dem Brinke “Europe’s Future” programme, Tel. +49 30 467 260-905 Research Fellow, Bertelsmann Stiftung www.delorsinstitut.de An emergency exit Jacques Delors Institut – Berlin Philipp Ständer Translation Sabine Feige Research Fellow, ETC Europe scrl, Brussels Project Assistant, Jacques Delors Institut – Berlin for the currency “Europe’s Future” programme, Edit Bertelsmann Stiftung David Gow, Edinburgh
Dr. Katharina Gnath Design union? Senior Project Manager, ressourcenmangel “Europe’s Future” programme, an der Panke GmbH, Berlin Bertelsmann Stiftung The euro does not provide its members with any option to leave. This protects the Production common currency against speculative attacks on the one hand. The euro crisis Jörg Haas, Author druck.haus rihn gmbh, Blomberg demonstrated on the other hand how difcult it is for Eurozone countries to con Research Fellow, structively solve economic and fscal policy conficts among themselves. Why was Jacques Delors Institut – Berlin Persons responsible according to the euro designed as a oneway street? What would be the consequences of an exit the German Press Law option? And what alternatives are there to an exit? Prof. Dr. Henrik Enderlein,
Joachim Fritz-Vannahme
according to the news agency Reuters on 12 July 2015 July 12 on Reuters agency news the to according 2015 July 11 on paper position a in in Le Parisien on 30 April 2017 April 30 on Parisien Le in
François Hollande, President of the Republic of France France of Republic the of President Hollande, François Finance of Ministry Federal German National Front party French the of Chairwoman Pen, Le Marine
retreats and no longer progresses […].” […].” progresses longer no and retreats years.” fve next the least engage in international trade.” international in engage
on 6 February 2017 February 6 on
Parliament European the at hearing a in euro zone. But in that case it’s Europe that that Europe it’s case that in But zone. euro at over […] necessary, if restructuring, debt possible with afect daily purchases, but only the large companies that that companies large the only but purchases, daily afect
Mario Draghi, President of the European Central Bank Bank Central European the of President Draghi, Mario
Greece in the euro zone or Greece not in the the in not Greece or zone euro the in Greece Eurozone, the from time-out a on negotiations swift ofered currency to a common currency. A currency that does not not does that currency A currency. common a to currency
there is only a Grexit or no Grexit. There is is There Grexit. no or Grexit a only is there be should Greece upfront, ensured be cannot perspective currency. That means converting the euro from a single single a from euro the converting means That currency. Questo è il trattato. This is the Treaty.“ the is This trattato. il è Questo
“There is no such thing as temporary Grexit, Grexit, temporary as thing such no is “There implementation credible a and sustainability debt case, “In “I will demand from the EU that we gain control over our our over control gain we that EU the from demand will “I irreversible. is euro The irrevocabile. è „L’euro
policy monetary a pursue cannot it
more, What’s market. global the on
cheaply more products own its sell
cannot devalue its currency so as to to as so currency its devalue cannot
economic crisis. A Eurozone country country Eurozone A crisis. economic
of the currency union to escape an an escape to union currency the of still available. available. still
their own. Consequently, the will of of will the Consequently, own. their members for difcult be can It lems. billion euro euro billion 373 with euro,
that they had a democratic mandate of of mandate democratic a had they that - prob raises also irreversibility that billion billion 500 to up lend can
The euro crisis showed, however, however, showed, crisis euro The a haircut for Greek debt, pointing out out pointing debt, Greek for haircut a sharp rise in infation. infation. in rise sharp become illiquid. The ESM The illiquid. become
Other European governments rejected rejected governments European Other but this would also lead to a a to lead also would this but through loans if they risk to to risk they if loans through
currency union needs an exit option. option. exit an needs union currency exits. further on Greeks wanted to remain in the euro. euro. the in remain to wanted Greeks exports more competitive, competitive, more exports countries to be supported supported be to countries
been repeatedly discussed whether the the whether discussed repeatedly been bet and countries crisis from fee to same time, however, two-thirds of of two-thirds however, time, same vis the euro and would make make would and euro the vis It allows for individual individual for allows It
is why – despite all the risks – it has has it – risks the all despite – why is enticing it fnd would participants reject the EU bailout in 2015. At the the At 2015. in bailout EU the reject cy could freely devalue vis-à- devalue freely could cy by the Eurozone countries. countries. Eurozone the by
This decisions. these of costs the cover market Capital . clear majority of the people voted to to voted people the of majority clear of fxed exchange rates exchange fxed of - curren new A supply. money institution that is controlled controlled is that institution
to countries Eurozone other obligate a than credible more be efectively leave the euro. the leave efectively a where Greece of case the in clearly system the control and mestically The ESM is a fnancial fnancial a is ESM The
policy. On the other, a country cannot cannot country a other, the On policy. hardly would union currency The a troduce most seen was This democracies. and thus thus and parallel currency parallel - do liabilities its settle can it Mechanism (ESM) Mechanism
ably like to freely choose its economic economic its choose freely to like ably possible. be suddenly would assets have forced the government to in to government the forced have national for much too been has euro - IOUs, government-backed European Stability Stability European
- understand would country sovereign fnancial euro-denominated on the supply of money, which would would which money, of supply the the leaving and reforms painful issuing by example for crisis,
programmes? On the one hand, a a hand, one the On programmes? losses related thus and departures It could have cut of Greek banks from from banks Greek of cut have could It implementing between choice The allel currency in an economic economic an in currency allel the exchange rate. rate. exchange the
(ESM) (ESM) Additional union. currency entire Bank took on a key role in the crisis: crisis: the in role key a on took Bank European Stability Mechanism Stability European par- a introduces state a If central bank to abandon to bank central
under reforms implementing and back the destabilise would Eurozone the framework, the European Central Central European the framework, cases. some in evil Parallel currency Parallel pressure may force the the force may pressure
cutting of tired grows population the from country a of departure The there was no clear political and legal legal and political clear no was there lesser the be might union currency the rency. However, persistent persistent However, rency.
and recover not does country zone euro exit without an EU exit. Since Since exit. EU an without exit euro leaving whether on and appropriate is one may refer to a Quadriga. Quadriga. a to refer may one it by buying or selling cur selling or buying by it -
- Euro a if done be to is What stability. currency. their weakening tentionally and the European Treaties foresee no no foresee Treaties European the and cuts budget of level what on raged has ments. If the ESM is included, included, is ESM the If ments. central bank has to stabilise stabilise to has bank central
is difcult to combine with European European with combine to difcult is - in by trade in advantages unfair any country out of the common currency currency common the of out country debate however, crisis, the after and require- reform with pliance too high or too low, the low, too or high too
The dilemma: National sovereignty sovereignty National dilemma: The create not do states member the that There is no obvious way to kick a a kick to way obvious no is There During reforms. economic extensive com- check and crisis in markets view this rate as as rate this view markets
common market in turn upon the fact fact the upon turn in market common tion has held the Eurozone together. Eurozone the held has tion and consolidation budget for return
countries with programmes pre-fxed level. If fnancial fnancial If level. pre-fxed
this “internal devaluation”. “internal this the and market; common one upon The absence of any ofcial exit op exit ofcial any of absence The in loans bridging providing grammes - out out bail joint the negotiate between currencies at a a at currencies between
economic exchanges; such exchanges exchanges such exchanges; economic that way. The population sufers from from sufers population The way. that - pro these with crisis, in countries the IMF and the ECB who ECB the and IMF the
to keep the exchange rate rate exchange the keep to
the EU where peace is founded upon upon founded is peace where EU the and make its exports more attractive attractive more exports its make and conditions of the the of conditions for ESM the as such funds bailout . Troika of the European Commission, European the of
An agreement among states states among agreement An
That is in line with the core logic of of logic core the with line in is That option than to drastically reduce wages wages reduce drastically to than option in the Eurozone by accepting the the accepting by Eurozone the in up set Eurozone the Instead, option. Name for the representatives representatives the for Name exchange rates exchange
There is no option to leave. leave. to option no is There versible. country in a crisis often has no other no has often crisis a in country
government ultimately decided to stay stay to decided ultimately government exit no be could there that ment
Troika fxed of System
the introduction of the euro is irre is euro the of introduction the late investment. Instead, a Eurozone Eurozone a Instead, investment. late - simultaneously everywhere. The Greek Greek The everywhere. simultaneously agree- in were members Eurozone
The European Treaties stipulate that that stipulate Treaties European The tailored to its needs in order to stimu- to order in needs its to tailored
the people could not be implemented implemented be not could people the all crisis, euro the of start the At
handled possible exits? exits? possible handled as a one-way street? one-way a as
How has the Eurozone Eurozone the has How Why was the euro designed euro the was Why EURO EXIT
A look ahead
SCENARIO 1 SCENARIO 2 SCENARIO 3 Disorderly exit Exit as threat Restructuring debt without exit
If there are insurmountable diferences of opinion between a Eurozone If the Eurozone sticks to the path of compromise between European The confict between sovereignty and stability can also be settled country in a sovereign debt crisis and the rest of the currency union, stability and national sovereignty that it pursued during the crisis, by ofering Eurozone countries an orderly insolvency process for their a disorderly exit is conceivable. The ECB can in efect exclude a highly the option of exclusion could continue to be used as a vaguely defned debts without requiring an exit from the currency union. A country indebted country from the euro by refusing to accept its government threat. If a country faces potential default, it negotiates with the Troika in crisis can decide between two options: Either it requires bailout bonds as collateral. In this case, the afected country’s fnancial system to set up a conditional lending programme. loans and accepts the greater influence of the Eurozone over its would collapse. Either as a reaction to this situation or of its own accord, economic and fscal policy for the length of the bailout programme. a state may introduce capital controls and a parallel currency. A failure of the programme is a risk for all participants since the con Or it enters into a kind of insolvency process that entails very hard sequences are unclear and potentially farreaching. The bailedout cutbacks over the short term, but the country maintains control There are doubts as to whether such an exit scenario is realistic: country fears immediate economic collapse, while the other Eurozone over its economic policy. For example, a parallel currency would have to be printed secretly, the countries worry about the crisis spreading to more member states. capital controls monitored perfectly, and the population forced to use Therefore, controversial negotiations repeatedly lead to a compromise. In the past, a restructuring of debt was inconceivable. It was feared the new currency. Even more difcult, however, is the question of At the same time, however, the population in the crisis country has no the European fnancial system was unequipped to handle the resulting who would be authorised to make such a decision without a demo democratic choice on the content of any reform programmes. losses, and fnancial markets would lose confdence in all euroarea cratic debate. This is because as soon as an exit is publicly considered, sovereign debt. A new insolvency process would have to be accom a massive fight of capital begins since companies and citizens fear It is in the shortterm interest of many Eurozone countries to preserve panied by institutional reforms that strengthen the resilience of the devaluation of their assets. This requires an immediate reaction: the status quo. This allows them to avoid an ofcial exit option and banks and credibly demonstrate that the Eurozone can protect each Either the state blocks the transfer of money overseas and thus takes nonetheless prompt countries at risk to introduce reforms. There are of its members if a country wants to. the frst step toward leaving the currency union or it puts an end to two risks in the medium term, however: First, the current approach the exit discussions and seeks greater support from the ECB. strengthens eurosceptical movements. Second, no precautions are This scenario requires a strong central decisionmaking body such taken to handle the event that a country decides, against expectations, as a European fnance minister who would in turn have to come to refuse a bailout programme. under strict democratic control. To date, not all Eurozone countries are ready to transfer such competences to the EU. At the same time, how ever, sharing sovereignty at the European level would re store member states to a position where they can again decide autonomously upon their economic policy.
FACT FACT What is the money from the FACT Euro bailout fund: bailout packages used for? System of fxed exchange rates vs. currency union How does the ESM function? # 1 # 2 The example of Greece, in billion euro # 3
1 1 1 € System of fxed Currency union Promises reforms and exchange rates budget consolidation 29.7 Is the exchange rate MoU Restructuring Charac teristics irreversibly fxed? of old debt Country in crisis ESM programme € 37.3 Is there only one central country bank and monetary policy? Lends at Aid for ESM somewhat Greek banks higher interest Do national currencies 52.3 rates, max. continue to exist? € 500 bn Interest payments on debt 215.9 9.7 Is an exit possible Do not lend Size of bailout Other government expenditure at any time? € temporarily packages 1+2 Contribution On demand € 81 bn € € € 624 bn Lend at € low interest What is the most important Effekte Promotes trade Promotes trade rates Effects economic effect?
How are economic Through reforms Only through imbalances resolved? or exit reforms Eurozone 86.9 Coordination of countries Repayment of debt What is the greatest Credibility economic and fscal Capital markets challenge? policy
Political framework What determines the Central bank and economic stability of the system? currency reserves integration
The solvency of the European Stability Mechanism (ESM) is guaranteed by all Eurozone A majority of the funds that Greece received in the frst two European bailout packages went Although a system of fxed exchange rates and a currency union pursue similar goals, they countries. This allows it to borrow money under better conditions and lend it to countries to private and public sector creditors. Only ten billion euro was used for classical government differ in important regards. A system of fxed exchange rates limits its members less, but is that do not have access to the capital markets themselves on account of a crisis. responsibilities such as investments, salaries or pension payments. more susceptible to speculative attacks.
Source: Author’s representation. Source: Author’s graph, based on Jörg Rocholl, Axel Stahmer (2016): Where did the Greek bailout money go? Source: Author’s representation. ESMT Working Paper WP–16–02.
“A euro exit does not permanently resolve either debt or economic problems. The governments of mandates against each other. Instead, Europe needs to legitimise the governance of the common
Jörg Haas The author is a Research Fellow at the Jacques Delors Institut – Berlin. www.strengthentheeuro.eu In the publication series “Europa briefng”, the Bertelsmann Stiftung and the Jacques Delors Institut – Berlin cover key topics of European politics and present possible scenarios: What is the problem? What might happen next? And what can politics do now?
You will fnd all the publications from the joint project here: www.strengthentheeuro.eu
Project team Imprint
Prof. Dr. Henrik Enderlein Heidi Marleen Kuhlmann © 2017 Bertelsmann Stiftung Director, Project Manager European Politics and Jacques Delors Institut – Berlin Jacques Delors Institut – Berlin, and Communication, Vice President and Professor Jacques Delors Institut – Berlin Bertelsmann Stiftung of Political Economy, Carl-Bertelsmann-Straße 256 Hertie School of Governance Max Emanuel Mannweiler 33311 Gütersloh, Germany Project Manager European Politics Tel. +49 5241 81-81183 Joachim Fritz-Vannahme and Communication www.bertelsmann-stiftung.de Director, Jacques Delors Institut – Berlin “Europe’s Future” programme, Jacques Delors Institut – Berlin Leaving the euro: Bertelsmann Stiftung Katharina Späth Pariser Platz 6 Project Manager, 10117 Berlin, Germany Dr. Anna auf dem Brinke “Europe’s Future” programme, Tel. +49 30 467 260-905 Research Fellow, Bertelsmann Stiftung www.delorsinstitut.de An emergency exit Jacques Delors Institut – Berlin Philipp Ständer Translation Sabine Feige Research Fellow, ETC Europe scrl, Brussels Project Assistant, Jacques Delors Institut – Berlin for the currency “Europe’s Future” programme, Edit Bertelsmann Stiftung David Gow, Edinburgh
Dr. Katharina Gnath Design union? Senior Project Manager, ressourcenmangel “Europe’s Future” programme, an der Panke GmbH, Berlin Bertelsmann Stiftung The euro does not provide its members with any option to leave. This protects the Production common currency against speculative attacks on the one hand. The euro crisis Jörg Haas, Author druck.haus rihn gmbh, Blomberg demonstrated on the other hand how difcult it is for Eurozone countries to con Research Fellow, structively solve economic and fscal policy conficts among themselves. Why was Jacques Delors Institut – Berlin Persons responsible according to the euro designed as a oneway street? What would be the consequences of an exit the German Press Law option? And what alternatives are there to an exit? Prof. Dr. Henrik Enderlein,
Joachim Fritz-Vannahme
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