Ambrose Evans-Pritchard writes of an article at L’Observatoire de L’Europe website which outlines plans by French economists of plans to orderly breakup the Eurozone. Although unlikely at this stage, it does give an idea of hwo it could be achieved and what may possibly happen.

“National currencies should be recreated in each eurozone country”. There will be a short transition period of dual notes as old euros are stamped by country (‘U’ for France) until new francs etc are printed. (This is what happened when the Austro-Hungarian monetary union fell apart in 1919.)

The new exchange rates will be determined by a formula that takes into account the accumulated inflation differential and trade balances since the launch of EMU.

The devaluations/revaluations will be set against a new unit of account reflecting the average weighting of the old euro (not anchored on the new D-Mark).

“The public debt of each state will be converted into the corresponding national currency, whoever the creditors may be. By contrast, the external debt of private entities will be converted into the European accounting unit. Even though this helps the stronger countries and penalizes the weak, it is the only feasible way to uphold preceding contracts.”

This will be achieved via Bank Holidays.

“All governments will declare a bank holiday for a limited period. They will temporarily close banks to determine which are viable and which will need to apply to the central bank.”

The central banks will lose their independence, returning to their pre-1970s status. (Quite right too. Central banks beyond democratic control are an outrage.)

Either devalue the Euro first of devalue the new currencies afterwards.

The new currencies will be fixed for a period, then subject to a dirty float with 10pc margins. The economists said the whole operation would be easier if the euro first saw a big depreciation on global markets.

If Germany did not like this, France could precipitate the euro slide by abrogating the Giscard Law of 1973 – which banned central bank financing of state debt. (I don’t really understand this point.)

There you have it. Would it work? Any thoughts?

The group of twelve economists are of course in the eurosceptic camp, not in any way linked to the Sarkozy team. What is new is that they are gaining a platform. They are: Gabriel Colletis, Alain Cotta, Jean-Pierre Gérard, Jean-Luc Gréau, Roland Hureaux,Gérard Lafay, Philippe Murer, Laurent Pinsolle, Claude Rochet, Jacques Sapir, Philippe Villin, Jean-Claude Werrebrouck.

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