German Independent Panel Favours Euro Exit for Insolvent Nations

The German government’s panel of independent economic advisers favors creating an insolvency mechanism for euro zone states and says countries should be able to leave the single currency as a last resort.

The Greek crisis has called into question the future of the euro. Wrangling over a third bailout for the heavily indebted country almost sending Athens crashing out of the euro zone.

In a report published on Tuesday, the council of five experts, known as the “wise men”, said the Greek crisis showed further reforms were needed, such as an insolvency procedures, to make the euro zone more stable.

But the council stressed that it should still be possible for a country to drop the euro as a “last resort”, to avoid threatening the existence of the single currency.

“In a currency union, the basic rules must be adhered to and for this reason the exit of a member state should not be taboo, for otherwise partners are susceptible to blackmail,” council member Lars Feld told reporters on a media call.

Feld also said the council viewed a third bailout for Greece as the “right step” as long as Athens implemented reforms.

via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza