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French Economists Call for a “Concerted Dismantling of the Euro”

In a call published in the Dec. 23 Le Monde, a group of very prominent senior economists from across the French political spectrum calls for a return to national currencies in the Eurozone, in order to avoid an “uncontrollable explosion.” Thus, a huge taboo has been publicly broken.

Clearly echoing Jacques Cheminade’s campaign, they recommend imposing a “bank holiday” during the time of transfer out of the euro, similar, we would add, to that of FDR in 1933, and point out that the abrogation of Glass-Steagall was one of the main causes of the current financial debacle.

Noting the differences among the various national economies of the Eurozone, the group of economists states that “the insistence of governments to rush headlong down the dead-end of the euro, can only lead to a general worsening of the economic situation in Europe.” Therefore, they propose to open “European consultations leading to the necessary dismantling of the euro.”

They lay out the series of six measures that should be taken.

"1) National currencies will be recreated in each of the countries of the zone. This will be done by exchanging every existing euro for a unit of this new currency. For paper currency, a short transition period will suffice during which the old euro notes -- uttered by each national bank and bearing a distinctive mark depending on the country (a 'U' mark for France) -- will be stamped over, until enough new notes have been printed for the exchange. For metal coins, the exchange can be done very quickly since they already carry one national side.

"2) On the date the euro is dismantled, the exchange rates of the new national currencies, with respect to one another, will be defined by mutual agreement, in order to restore regular conditions of trade. That is the only means to viably resolve the main problem, which is net foreign debts. The price rises in each country since the creation of the euro will be taken into account, as well as the status of its foreign trade. The devaluations or revaluations required will be defined against a European unit of account, the international value of which will be calculated by a weighted average of the exchange rates of national currencies, as was the case for the former ecu [pre-euro "European currency unit"].

"3) Inside each country, at the time of the dismantling, prices for goods and services, as well as the value of assets and bank accounts, will remain unchanged. The disappearance of the euro means that the public debt of each state will be converted into its corresponding national currency, regardless of who the creditors are, except for those who hold trade debt. In contrast, the foreign debts of private agents, including their foreign trade debt, will be converted into European units of account. Although this solution favors stronger countries to the detriment of the weaker countries, it is the only realistic means to ensure the continuatopm of previously concluded contracts.

"4) To avoid having to establish foreign exchange controls, all the governments will declare bank holidays for a limited period. (one week or more if needed) ; just as U.S. President Franklin Roosevelt did in 1933, they will temporarily close the banks to determine which are viable and which must seek help from the central bank. Their stock market trading will be suspended during this period. The solution will be based on a universal principle, applicable to all countries, in deciding that the guarantee will be assumed by the central banks, which relinquish their independence and return to the status they had previous to the 1970s. The state will protect depositors, by taking over, if required, part of the banking system.

"5) The nominal exchange rates of national currencies will remain fixed during this same period, in line with the parities decided by mutual agreement. They may then be floated on the market, within a 10% margin of fluctuation. Negotiations on an ideal European system can be undertaken at a later date. A new European monetary system could be considered in order to stabilize real exchange rates, in light of the differences in inflation rates.

"6) This operation would be made easier, if the exchange rate of the euro with other currencies fell before the dismantling. Putting an end to a strong euro will probably not be accepted by all our partners nor by the ECB, but France could contribute to such by repealing the 1973 "Giscard law" [which Cheminade's campaign program also calls for]. This law, which prohibits the central bank from financing public debt, was first consolidated in the Maastricht Treaty and again in the Lisbon Treaty.

"In the future, we believe it will not be possible to avoid facing the problems that were masked by the euro crisis, in particular the explosion of private monetary creation and the global drift of banking systems, as a result of the repeal of the Glass-Steagall Act."

The call was signed by: Gabriel Colletis, Alain Cotta, Jean-Pierre Gérard, Jean-Luc Gréau, Roland Hureaux, Gérard Lafay, Philippe Murer, Laurent Pinsolle, Claude Rochet, Jacques Sapir, Philippe Villin, Jean-Claude Werrebrouck.

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