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Breaking up the euro

It is no longer forbidden to mention exit from the monetary union.

Ten years ago, in the run-up to the launch of Europe’s single currency and in its aftermath, Euromoney journalists used to play a rather childish game with European politicians, central bankers and regulators.

We would always ask them what fall-back plans were in place for an eventual break-up of the single currency. The joke was that they could never admit to any such possibility. There were no plans... because it could never happen.

Euromoney could devise plenty of circumstances in which various countries among a group whose economies were prone to boom and bust on separate cycles would want to escape from the constraint of a single interest rate and a currency that could not be devalued. It seemed ludicrous that the single currency required an almost religious leap of faith and that otherwise rational economists and bureaucrats must simply deny any chance of a country ever wanting to leave or being expelled by the others.

And so Euromoney was shocked and strangely gratified to read the words of German finance minister Wolfgang Schäble writing in the Financial Times on the tortured moves towards bailing out Greece. "If a country should find itself unable to consolidate its budgets or restore its competitiveness, this country should, as a last resort, exit the monetary union."

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