Anatomy of a Grexit: how Greece would go about leaving the eurozone

Jonathan Loynes and Jennifer McKeown, economists at Capital Economics, look at the key issues and challenges of a Grexit, and explain how it might be best managed.

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A Grexit could be good for both Greece and the rest of the eurozone

Jonathan LoynesandJennifer McKeown, economists atCapital Economics, won the Wolfson Prize for their 2012 paper on how the exit from the eurozone of a small country such as Greece might best be managed. MoneyWeek published the plan in February 2015. But things have developed since then.

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Step 1A few days before exitClose banks (including ATMs) and announce intention to exit
Step 2Immediately after decisionStart printing new currency
Step 3The week before exitEnforce and assist in re-denomination of all domestic bank accounts, wages and prices
Step 4The week before exitAnnounce intention to default on at least half of public debt and start negotiations with the Troika
Step 5The week before exitRedenominate private international debts into drachmas where possible
Step 6The week before exitAnnounce inflation targeting and strict fiscal rules for the future
Step 7Exit dayAnnounce reinstatement of drachma at parity with euro, reopen banks and impose capital controls
Step 8A few days after exitRecapitalise banks and large firms with euro-denominated debts, using QE if necessary
Step 9Up to six months after exitElectronic transactions in drachmas, small amount of euros available for necessary cash transactions
Step 10About six months after exitAll euros replaced with new drachmas, conversion complete
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