Emergency exit, or business as usual?

Article published on June 28, 2012
Article published on June 28, 2012
By Cristina Mariani Will the euro survive the sovereign debt crisis? Long negotiations and press conferences in the small hours, followed by the usual non-conclusions. At least we've got the football. Cafebabel is attending the council summit today, and the euro is in jeopardy and on the agenda for the umpteenth time. The question remains: will the euro survive the sovereign debt crisis?
History might repeat itself and we are strapping ourselves in for long negotiations, usually followed by a press conference in the middle of the night, rousing journalists from their slumber only to announce the same age-old lack of conclusions.

This time, however, the European Championships may keep everyone awake, waiting for the German Chancellor’s reaction to the summit negotiations, which is contingent on the outcome of the match against Italy. Over the past few days, there have been many articles in the press indicating that the future of the common currency is in Angela Merkel’s hands (“Why Monti needs to speak truth to power” wrote the FT, “Germany make the bad choice, not the disastrous one” pledged Süddeutsche Zeitung), while Merkel however said that there won’t be euro-bonds while there is still breath in her body.

We need an emergency exit. Time has come for the heads of state to make a decision: either save the euro and move forward and build upon the foundation of a true and effective political and fiscal union, or decide to move backward and dismantle the euro project. A euro-stasis is no a longer viable option. It is time to find a solution that works, and fast.

Over the past nine months, some important changes have occurred. Mario Monti has replaced Silvio Berlusconi, Mariano Rajoy has replaced José Luis Rodríguez Zapatero, Francois Hollande has replaced Nicholas Sarkozy, and the Greek government has had to face up to fears of an imminent Greek exit from the euro together with those of the most critical political crisis that has led to the election of the conservative New Democracy party. Although “new”, these EU players are still trying to strike a balance between austerity measures and job market reforms, while Ms. Angela ‘Austerity’ Merkel still appears to be on the warpath.

Will it be the same for the European Cup match tonight? Or, in other words, will Italy, i.e. Mr Monti – the plumber who succeeded the playboy Berlusconi (or so writes Wolfgang Muchau in the Financial Times) be able to smoothe the variety of national positions and fix the debt crisis?

The brainteaser of the issue actually has something of a “romantic” component. The difficulty in arriving at an agreement as to the solution to solve the crisis is due, inter alia, to the lack of any provision in the EU treaty for leaving the euro, even though there is one for leaving the EU entirely. It is something like signing a “marriage contract” without including the clause which provides room for something like special grounds for termination.

Together until death, debt, do us part

A legal analysis on the issues clarifies possible consequences. Unless complete dissolution of the eurozone takes place, members states are left with three potential exit scenarios:

They can voluntary withdraw from the EU, thereby also leaving the eurozone; They can lawfully negotiate their exit from the eurozone by amending the EU treaties and through unilateral consent of the remaining 26 Member States; or They can decide to unlawfully and unilaterally withdraw from the eurozone by re-introducing a new national currency by breaching EU treaty obligations.

Let’s hope it doesn't go to penalties.