Operational Aspects of a Hypothetical Demise of the Euro

Abstract:

This article illustrates what would be the operational implications of a hypothetical demise of the euro. In order to do this, it examines what were the operational implications of establishing the euro and shows that the opposite endeavour would not just be its symmetric counterpart. The paper also looks at two developments that took place after the launch of the euro – the emergence of very large Target2 balances during the crisis that started in 2010 and the move towards financial integration – showing that they would add to the formidable operational complications that would be created by the demise of the euro. The paper concludes that the logistical difficulties considered here only look minor in comparison with the fundamental reasons that led governments and central banks to fight with determination the risk of a demise of the euro. In absolute terms, they are important enough to tilt the balance of costs and benefits in the direction of preserving the eurozone.