Possible Grexit: How to leave the Eurozone

How do you see the process of possible Grexit? It might be somehow uncharted territory, but could Greece stay in the EU without being in Eurozone and is it even possible to expel Greece from the Eurozone? Read few comments.

Henri de Waele, Full Professor of International and European Law, Faculty of Law, Radboud University Nijmegen

With regard to your interesting question. Actually, I hold slightly unorthodox views on this issue. In the media, it is often stated that there is no possibility for a Eurozone member to leave the Eurozone without also leaving the EU. Mr Varoufakis himself pointed to Article 50 of the EU Treaty last weekend, to make clear to his colleagues that this is legally impossible – since the provision only allows Member States to leave the EU altogether. Moreover, the common assumption is that it is impossible to “kick out” a Member State. In contrast, I think there are three possibilities to actually have Greece leave the Eurozone and not the EU. The first opening is to be found in the general law of treaties (contained in the so-called Vienna Convention of 1969). It actually allows for parties to suspend, in whole or in part, certain rights and duties stemming from a treaty vis-a-vis a member that fails to act in accordance with its conditions requirements. This would mean that the other Eurozone countries could argue that, since Greece has persistently violated the EMU requirements and conditions, it could effectively be excluded from that part of European law. A second option would be to argue that, since Greece cheated in its original application (“cooking the books”, as we know now), this retroactively affects the validity of its admission. Legally speaking then, Greece did not provide the right information and thus acted in bad faith; this means that the conclusion could be drawn that it was drawn into the Euro on false premises. It thus would not be “kicked out”, but the right perspective would be that it originally never lawfully joined the single currency anway (in this way we “reverse the clock”, so to say). A final possibility is just that the other EU Member States exercise such strong (political) pressure on Greece that it voluntarily decides to withdraw from the EMU-dimension of the European Union. This could be labelled an informal way of expelling, but it is something that is perfectly lawful: any treaty can be changed or modified with the consent of all the parties, so as long as Greece officially complies with the request of the other Member States to leave the Eurozone, there is no theoretical obstacle from proceeding in this manner. Whether a “Grexit” can be practically achieved, and whether it is economically viable or smart is of course a completely different matter; I personally thing the ramifications might be worse than a protracted stay. But, if the general sentiment is that the country should go, a legal route can still be found (as indicated above) to follow up on that political decision.

Frank HägeLecturer in Politics, Department of Politics and Public Administration, University of Limerick

Legally, it is not really possible to expel Greece from the Eurozone. Membership in the Eurozone was intentionally designed to be irrevocable. In this respect, we are really in uncharted territory. There is no formal way for Greece to exit the Euro, unless it exits the EU entirely. But even a complete exit from the EU is not a viable option, since the process takes a couple of years; and if Greece wants to revert back to its own currency, it would want to do that pretty quickly.

In practice, if the ECB cuts off Greek banks from its emergency money supply, the only option for the Greek government to re-establish a working financial system might be to start printing its own money again. If that happens, Greece de facto has left the Eurogroup and some legal concept will have to be invented to recognize this situation. I don’t think anybody in the EU has an interest in Greece leaving the EU altogether, so some creative interpretation or loophole will be found to reconcile reality with abstract legal principles.

For example, Sweden is legally obliged to adopt the Euro since its accession in 1995, but after a referendum in which the Swedish people rejected the Euro, Sweden is rejecting to adopt the Euro based on grounds that it does not meet the specified economic and monetary conditions. Keeping in mind that Sweden is not making much of an effort to meet those conditions, this rejection could be easily challenged in Court. However, nobody has the political interest to do so. Maybe a temporary exit of Greece from the Eurogroup (leaving it open how long ‘temporary’ means), until the country meets the conditions of Euro adoption again, could be a solution. But at this stage, this is just pure speculation.

Doreen Allerkamp, Post-Doc Researcher, Mannheim Centre for European Social Research (MZES), University of Mannheim

Yes, I do see the possibility of Grexit from the Euro, if not from the EU (the latter would be very unlikely, I think). I do not think either event will do harm to either the EU or the Euro. The demise of the Euro has been predicted in hysterical tones periodically ever since its inception, and it is doing just fine. Indeed, upon the announcement of the EU and ECB decisions, it barely moved, losing some value initially but recovering quickly.

Greece is going to suffer much more if it is indeed compelled to withdraw from the Euro (it would not be expelled but would have to withdraw). But it could stay in the EU no problem, plenty of EU members are not members of the Eurozone, whether by choice or because they do not fulfil the convergence criteria. Greece has never met those criteria, but was admitted and tolerated for political reasons since. The political reasons – the Euro is a political much more than an economic project – are still valid, but overshadowed by economic pressures.

Personally, I think the whole issue is being overly dramatised. The coverage is unbearably shrill. Whether or not Greece will leave the Eurozone won’t matter much for the latter; the institutions and the system as a whole have demonstrated their robustness. But Greece will not cease to exist, either.

It is just a question of how the inevitable cost will be distributed. The underlying problem is that Greece’s economy and social system are very unhealthy, as a culture of encrusted corruption has been allowed to take hold over many decades. This is not repairable in the short-term, but repaired it must be for Greece to achieve enough sustainable wealth creation to support itself. Membership of the Eurozone has, for the first time in Greek history, created sustained reform pressure on Greece which the Greek system has not been able to shirk, hence the complaints, the suffering, and all the failed attempts at evasive manoeuvres. Exiting the Eurozone will relieve that pressure somewhat, but populists believing that Greece will be able to function unchanged in the future inside the Eurozone or out of it without massive and sustained reforms are deluding themselves. Yes, it’s going to be hard, yes, it’s inevitable, and there is no easy way out.

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