Cut and Run

A quote from Anatole Kaletsky in The Times, 8 August 2005
But could Italy credibly threaten to recreate its own currency? So powerful is the dogma that withdrawal is impossible that only two legal scholars have ever seriously examined this issue. They are Hal Scott, of Harvard Law School, and Charles Proctor, a solicitor at Nabarro Nathanson and author of a new chapter on withdrawal from the eurozone in the sixth edition of Mann on the Legal Aspect of Money, a book described by central bankers as “the Bible” of international monetary law. Unfortunately for the ECB, in its role as the guardian of the European banking system, both these authorities agree on two points: first, that despite the prohibitions in EU treaties, the Italian Government would have the legal ability to recreate its own currency, although withdrawal would, of course, entail big financial and economic risks; secondly, that the Government would be entitled to rewrite Italian financial contracts, including its own bond obligation, into new lire — and that investors who claimed to be defrauded by such a “redenomination” could not expect support from British or American courts.