Euro break up question

Discussion in 'Economics' started by Highterm, May 17, 2010.

  1. Highterm


    This is not a question of if the Euro will breakup but rather what would happen if it did break up, specifically, at what rate would exiting members exchange their Euros into their new (old) currency. How would the authorities decide what exchange rate to use, would it simply be at the rate at which they entered the Euro or is there a method for re-calculating this?

    For example-
    If Germany decided to pull out of the Euro, how many (new) Deutschmarks per Euro would the people receive in their bank accounts?

    Would it be at the rate at of DM1.956 per Euro at which Germany entered the Euro?

    Would it be based on external currency rates, such as the US$?

    Or is there some other calculation?

  2. That's the bazillion dollar question... As far as I am concerned, nobody knows the answer.
  3. The rate would be 1:1 I'm sure. Then the free market would let the new currency go up or down. They would still have to pay back what they owe in euro though.
  4. No, Germany will be likely to re-denominate its existing debt outstanding into DEM.
  5. The only real threat to the euro would be if a member country started printing their own money without permission from the general counsel. Right now, if I have a euro then I can spend it any of a number of different countries. If I have to worry about it being a "German Euro" or a "Greek Euro" because the Greek version is not worth as much as the German version, then I don't want to hold any euro at all. That's how wars start. I don't really think Germany will invade Greece, but there would be swift and decisive action.