An orderly EMU break-up, à la Française

The Telegraph, By Economics, Last updated: February 7th, 2012 – 

Is the French franc on its way back?

Salut souverainistes. For those wanting more details on the euro break-up plan drafted by French economists, here is the link to the L’Observatoire de L’Europe website.

A few extracts, loosely translated: “The obstinate determination of governments to take us by forced march deeper into the euro impasse can only lead to the general aggravation of the economic situation in Europe.”

“Even though our American and Chinese competitors have an interest in the survival of the single currency, the euro is condemned to an uncontrollable explosion sooner or late”. (A nice twist that one, inverting the false and widely believed conspiracy theory that the US is trying to destroy the euro.)


“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.”

“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.)

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.


Ambrose Evans-Pritchard has covered world politics and economics for 30 years, based in Europe, the US, and Latin America. He joined the Telegraph in 1991, serving as Washington correspondent and later Europe correspondent in Brussels. He is now International Business Editor in London. Subscribe to the City Briefing e-mail.

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