A British-based consultancy has won a lucrative prize for devising the best eurozone exit strategy, organisers said Thursday, amid ongoing concern over the potential departure of debt-plagued Greece.
Capital Economics has scooped the Wolfson Economics Prize for coming up with the best method for an "orderly exit" of one or more member countries wishing to leave the European Monetary Union.
The prize, consisting of £250,000 (311,453 euros, $389,487), is backed by a eurosceptic member of Britain's Conservative party, which heads a coalition government with Liberal Democrats.
"The winning entry outlines the smoothest process by which a member state could exit the eurozone," the organisers said in a statement.
"It concludes that even though there would be some losers as well as winners from the exit of one or more members from the euro, the net effect overall would be distinctly positive for the future growth and prosperity of the current membership -- and for the wider world."
The Capital Economics team, led by Roger Bootle, submitted a report entitled 'Leaving the euro: A practical guide,' which centred on the exit of a single weak member -- such as Greece.
Under the proposals, the exiting nation would need to set up a new currency on day 1 of its exit, setting it at parity with the euro. All wages, prices, loans, deposits would be redenominated on that basis.
Euro notes and coins would remain in circulation for up to six months for small transactions.
And the departing eurozone member would also set new targets for inflation, and adopt tough fiscal rules that would be monitored by independent experts.
Government debt would also be redominated into the new national currency and the country would seek to renegotiate the terms of this debt. That would "likely" involve a substantial default, according to Capital Economics.
The consultancy also proposes that key officials from the departing country meet in secret, prior to announcing the departure day, or D-day.
Eurozone partners and other international monetary organisations would be notified of the move, three days prior to the exit, and preferably on a Friday to allow three days for preparation.
Capital Economics said that domestic banks and financial markets would be closed immediately after this announcement to prevent flight of capital.
"The judges unanimously viewed Capital Economics' submission as the most credible solution to the question of how an orderly exit from the eurozone by one or more of its member states could be managed," prize organisers added.
Lord Wolfson of Aspley Guise, also known as Simon Wolfson, the chief executive of British fashion retailer Next and a Conservative party donor, is funding the award.
The prize claims to be the second biggest cash award offered to an academic economist after the Nobel Prize for Economics.
From ahram online