Print Page

Graham Bishop's comment on the Wolfson Economics Prize

The world's top academic economists have been challenged to suggest how to manage the orderly exit of Member States from EMU. A new Economics Prize worth £250,000 (€286,000) is offered by Policy Exchange, the London-based think tank, and funded by eurosceptic, Lord Wolfson.

Personal comment from Graham Bishop:

I do not normally comment on articles that we include, but I felt that I had to comment on this!

Many of the eight points [1] are the subject of extensive discussion in circles that certainly cannot be called eurosceptic. But the answers that normally emerge are that it is so difficult that it is much better to make the effort to ensure that all States remain in the monetary union. As a member of the Maas Committee in 1994/5 that played a leading role in designing the details of the changeover into the euro, it has always been clear to me that the positive benefits accruing to all the potential members of the eurozone created a wave of stabilising speculation that assisted the construction of the euro.

The current situation is the exact opposite: holders of financial obligations in the potentially-leaving States know full well that they face possibly ruinous reductions in the value of their assets. Human nature suggests they will make strenous efforts to protect themsleves - with entirely predictable and foreseeable results. In my frequent debates with eurosceptics who argue for some States leaving, they are never able to explain how this can happen in practice and avoid such foreseably disastrous results.

With such an attractive bribe on the table, if  eurosceptic thinkers fail to come up with detailed proposals that withstand scrutiny as practical policies that are workable for tens of millions of people, then the citizens of Europe will be entitled to believe that the best course is to resolve  the undoubted difficulties facing the monetary union and develop into an "ever-closer union". Eurosceptics have now challenged themseves to join the real world with a simple test: put up or shut up.

Graham Bishop

[1] Excerpted from Policy Exchange website - click here to read full article.

Applicants will be asked to explore in detail the issues that exit from EMU would raise. These include:

1. Whether and how to redenominate sovereign debt, private savings, and domestic mortgages in the departing nations.
2. Whether and how international contracts denominated in euros might be altered, if one party to the contract is based in a member state which leaves EMU.
3. The effects on the stability of the banking system.
4. The link between exit from EMU and sovereign debt restructuring.
5. How to manage the macro-economic effects of exit, including devaluation, inflation, confidence, and effects on debts.
6. Different timetables and approaches to transition (e.g. “surprise” redenomination versus signalled transitions).
7. How best to manage the legal and institutional implications.
8. A consideration of evidence from relevant historical examples (e.g. the end of various currency pegs and previous monetary unions).