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Hal S. Scott, When The Euro Falls Apart: A Sequel (Harv. L. Sch. Pub. L. & Legal Theory Working Paper Series, Paper No. 12-16, 2012).

Abstract: This paper examines the case for Member States withdrawing from the euro area (using Greece and Italy as examples), focusing on the economic benefits to exit and the operational and legal obstacles to doing so. It concludes that withdrawal is preferable to solely restructuring debt that remains denominated in euros. While both techniques can decrease debt burden, only withdrawal and establishment of a new currency allows for devaluation that can restore the competitiveness of economies. While some commentators fear the losses that devaluation might impose, particularly on European banks, the paper proposes using the European Union’s existing Exchange Rate Mechanism (ERM) to ensure that losses could be held to levels comparable to the debt haircut achieved through restructuring. This plan should be adopted now whether or not Greece uses it so it is in place for possible future withdrawals.