Withdrawal from the Eurozone

Withdrawal from the Eurozone denotes the process whereby a Eurozone member-state, whether voluntarily or forcibly, stops using the euro as its national currency and leaves the Eurozone. , no country has withdrawn from the Eurozone.

Background

The possibility of a member state leaving the Eurozone was first raised after the onset of the Greek government-debt crisis. The term " Grexit" itself was reportedlyGrexit
by Kate Mackenzie and Joseph Cotterill, ''Financial Times'' Alphaville, 7 February 2012 first used by Citigroup economists Willem Buiter and Ebrahim Rahbari in a 2012 report about the possibility of Greece leaving the Eurozone. In the 2015 edition, the term "Grexit" entered the Oxford English Dictionary, defined as "a term for the potential withdrawal of Greece from the Eurozone, the economic region formed by those countries in the European Union that use the euro as their national currency.

Speculation followed about other countries, such as Italy, withdrawing from the Eurozone as well,Debt crisis: as it happened
, '' Daily Telegraph'', 11 November 2011 with economist Nouriel Roubini submitting in 2011 that "Italy may, like other periphery countries f the Eurozone need to exit the euro and go back to a national currency, thus triggering an effective break-up of the Eurozone."

There are some European cases of a country having a common currency obtaining their own, when countries split apart. Czech koruna and Slovak koruna split from Czechoslovak koruna in 1993, both at exchange rate 1:1. Banknotes were stamped as a way of converting them to the new currency. Additionally, the Slovenian tolar and Croatian kuna were created by leaving the Yugoslav dinar, and the Estonian kroon, Latvian lats, and Lithuanian litas were created by leaving the Soviet ruble.

Legal environment

It has been argued"Brussels: No one can leave the euro"
by Leigh Phillips, '' EUobserver'', 8 September 2011The Eurozone crisis – the final stage?
by Charles Proctor, Locke Lord, 15 May 2012 that there is no provision in any European Union treaty for an exit from the Eurozone. Moreover, it has been argued, the Treaties make it clear that the process of monetary union was intended to be "irreversible" and "irrevocable." However, in 2009, a European Central Bank legal study argued that voluntary withdrawal is legally not possible but expulsion remains "conceivable."Withdrawal and Expulsion from the EU and EMU : Some reflections
by Phoebus Athanassiou, Principal Legal Counsel with the Directorate-General for Legal Service, ECB, 2009 Although an explicit provision for an exit option does not exist, many experts and politicians in Europe have suggested that an option to leave the Eurozone should be included in the relevant treaties."German advisory council calls for exit option in the eurozone"
by Daniel Tost, EurActiv, 29 July 2015

Other analystsHow to exit the Eurozone?
by Marijn van der Sluis, 22 March 2013 have submitted that there are basically three ways of exiting the Eurozone: by leaving and subsequently rejoining the EU, whereby a renewed membership in the European Union would be possible only when economic convergence had been achieved; through a Treaty amendment; or through a European Council decision. The amendment would involve an extension of Article 50 of the European Treaty that would set out the process for exiting the euro.

A decision by the European Council would "probably" have to be unanimous and "with the consent of the European Parliament." It would state that a Eurozone member-state "will no longer be part of the Eurozone" and will become a member-state "with a derogation", by withdrawing the Council's earlier decision for that state's entry into the Eurozone. Article 139 regulates the terms of this "derogation":

Member States in respect of which the Council has not decided that they fulfil the necessary conditions for the adoption of the euro shall hereinafter be referred to as 'Member States with a derogation'.

The competence of the Council to retract its earlier decision would "possibly" invoke the argument that a given competence to decide on a matter always includes the competence to retract that decision. Additionally, this retractile power can be derived from the "flexibility clause" of article 352 TFEU, which grants the Council, on a proposal from the Commission and with the consent of the European Parliament, the ability to unanimously adopt the "appropriate measures" to attain one of the objectives set out in the Treaties as set out in Article 3 of the European Union – essentially ascertaining that staying in the Eurozone would be so "devastating" for the well-being of the people of the member-state, and/or the rest of the peoples of Europe, that an exit would be legitimate in light of the Treaties' objectives. Then, it would be ostensibly possible to take a decision retracting the previous decision that approved entry to the Eurozone.

Acknowledging that the method of any departure from the Eurozone remains "unknown," legal analysts have pointed out that any potential withdrawal "includes the spectre that euro obligations owed by residents of departing member states might be redenominated into henewly established national currencies."Eurozone crisis – the corporate perspective
, Herbert Smith LLP report, January 2012

On the issue of leaving the Eurozone, the European Commission has stated that " e irrevocability of membership in the euro area is an integral part of the Treaty framework and the Commission, as a guardian of the EU Treaties, intends to fully respect hat irrevocability" The Commission added that it "does not intend to propose nyamendment" to the relevant Treaties, the current status being "the best way going forward to increase the resilience of euro area Member States to potential economic and financial crises.Text
of response by Olli Rehn, European Commissioner for Economic and Monetary Affairs and the Euro, on behalf of the European Commission, to question submitted by Claudio Morganti, Member of the European Parliament, 22 June 2012 The European Central Bank, responding to a question by a Member of the European Parliament, has stated that an exit is not allowed under the Treaties.

Withdrawal from the European Union

If a state leaves the European Union, Article 50 of the Treaty on European Union says that "Treaties shall cease to apply to the State in question". If the state has been using the euro as its currency then, rather than form a new domestic currency, it might continue to use the euro unilaterally or by way of a monetary agreement with the EU as Montenegro or Andorra do without being a member of the EU.

Potential operational process

On 18 October 2011, Eurosceptic British businessman and Conservative life peer Simon Wolfson launched a contest that offered a £250,000 reward for "a plan for how the euro could be safely dismantled," and for "what a post-euro eurozone would look like, how transition could be achieved and how the interests of employment, savers, and debtors would be balanced."

The winning entry, titled "Leaving the Euro: A Practical Guide,""Wolfson prize for euro exit plan won by Roger Bootle"
BBC
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