Voluntary withdrawal or forced exclusion from the euro area seem to be a viable option for mitigating the financial burdens of some member-states whose currency is the euro. The introduction of a parallel currency is also regularly recommended as a solution for the staggering problems of some of these countries.
Are such plans legally possible? How can the introduction of a new currency in a member-state – be it parallel or in substitution of the euro – solve the debt problems of such a state and its banks? Can they really lead to the aspired alleviation of the debt burden when the majority of claims are still denominated in euro?
Over time some jurisprudence has been developed that does not simply accept the introduction of a new currency by a unilateral act of a government in financial distress. The re-denomination of claims after a change of the currency is a thorny and cumbersome field of legal reasoning, especially if the legality of the introduction of the new currency is not free from serious doubts.
My deliberations on this complex scenario are structured according to the following questions, which are closely related to each other but for sure demand a distinctively different treatment:
Is it legally possible for a Member State to leave the eurozone?
May Member State introduce a new currency parallel to the euro?
Can a Member State be excluded from the eurozone or the Monetary Union?
May permission be granted to introduce a new currency in a Member State of the eurozone?
What are the consequences of an illegal exit from the eurozone?
In summary, I have concluded that a unilateral withdrawal from the obligations of the Monetary Union allowing the re-introduction of a currency of its own by a member-state whose currency is the euro has to be judged as illegal, with severe economic and legal consequences. The introduction of a parallel currency as legal tender is also legally forbidden, as is the option of expulsion of a recalcitrant member-state.
The economic logic of a unilateral withdrawal, from the point of view of the member-state in question, is also highly questionable. It would be an open invitation for speculators of the world to destabilize the finances of the country and, particularly in the case of a non-consensual exit, it would make re-denominating the public debt extremely complicated. But even ignoring economics, the legal complexities of a possible Grexit are reason enough to avoid it.