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Operational Aspects of a Hypothetical Demise of the Euro

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  • Francesco Papadia

Abstract

This article illustrates what would be the operational implications of a hypothetical demise of the euro. In order to do this, it examines what were the operational implications of establishing the euro and shows that the opposite endeavour would not just be its symmetric counterpart. The paper also looks at two developments that took place after the launch of the euro – the emergence of very large Target2 balances during the crisis that started in 2010 and the move towards financial integration – showing that they would add to the formidable operational complications that would be created by the demise of the euro. The paper concludes that the logistical difficulties considered here only look minor in comparison with the fundamental reasons that led governments and central banks to fight with determination the risk of a demise of the euro. In absolute terms, they are important enough to tilt the balance of costs and benefits in the direction of preserving the eurozone.

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  • Francesco Papadia, 2014. "Operational Aspects of a Hypothetical Demise of the Euro," Journal of Common Market Studies, Wiley Blackwell, vol. 52(5), pages 1090-1102, September.
    • Handle: RePEc:bla:jcmkts:v:52:y:2014:i:5:p:1090-1102
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    File URL: http://hdl.handle.net/10.1111/jcms.12135
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    References listed on IDEAS

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    1. Hans-Werner Sinn & Timo Wollmershäuser, 2012. "Target loans, current account balances and capital flows: the ECB’s rescue facility," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(4), pages 468-508, August.
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    4. Francesco Papadia, 2013. "Central bank cooperation during the great recession," Policy Contributions 782, Bruegel.
    5. Bindseil, Ulrich & Winkler, Adalbert, 2012. "Dual liquidity crises under alternative monetary frameworks: a financial accounts perspective," Working Paper Series 1478, European Central Bank.
    6. Philippine Cour-Thimann, 2013. "CESifo Forum Special Issue April 2013: Target Balances and the Crisis in the Euro Area," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 0(1), pages 05-50, May.
    7. Bindseil, Ulrich & König, Philipp Johann, 2011. "The economics of TARGET2 balances," SFB 649 Discussion Papers 2011-035, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    8. PhilippineCour-Thimann, 2013. "CESifo Forum Special Issue April 2013: Target Balances and the Crisis in the Euro Area," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 0, pages 05-50, May.
    9. Buiter, Willem & Rahbari, Ebrahim, 2012. "Target2 Redux: The simple accountancy and slightly more complex economics of Bundesbank loss exposure through the Eurosystem," CEPR Discussion Papers 9211, C.E.P.R. Discussion Papers.
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    Cited by:

    1. Federico Steinberg & Mattias Vermeiren, 2016. "Germany's Institutional Power and the EMU Regime after the Crisis: Towards a Germanized Euro Area?," Journal of Common Market Studies, Wiley Blackwell, vol. 54(2), pages 388-407, March.

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