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Title:The option of last resort: A two-currency EMU PDF Logo
Authors:Arghyrou, Michael G.
Tsoukalas, John D.
Issue Date:2010
Series/Report no.:Cardiff Economics Working Papers E2010/14
Abstract:This article, originally published at www.roubini.com on 7 February 2010, spells out our two-currency EMU proposal as a plan of last resort for resolving the present EMU sovereign-debt crisis. The key ingredients of our proposal involve a temporary split of the euro into two currencies, both run by the European Central Bank. The hard euro will be maintained by the core-EMU members whereas periphery EMU countries will adopt for a suitable period of time the weak euro. All existing debts will continue to be denominated in strong-euro terms. The plan involves a one-off devaluation of the weak euro versus the strong one, simultaneously with the introduction of far-reaching reforms and rapid fiscal consolidation in the periphery EMU countries. We argue that due to enhanced market credibility, our two-tier euro plan has a realistic chance of success in resolving the EMU crisis, if all other approaches fail.
Subjects:euro
two-currency EMU
JEL:E44
F30
G01
Document Type:Working Paper
Appears in Collections:Cardiff Economics Working Papers, Cardiff Business School, Cardiff University

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