By Mark Whitehouse
Simon Wolfson, chief executive of British retailer Next Plc., has decided to play his part in deciding the fate of the European experiment. With much fanfare, he has offered a prize of 250,000 pounds to the economist who can find an orderly way for a country (read Greece) to exit the euro area.
It's a pretty good bet. If somebody actually produces a plan, great. If not, Wolfson -- a long-time opponent of European integration -- will be able to keep his money, get some free advertising for his company and succeed in demonstrating just how disastrous an exit would be.
Economists have written a fair amount on what leaving the euro area would entail. In Greece's case, everything from work contracts to parking meters and vending machines would have to be converted back to drachma. Banks would need to drachma-tize accounts, too, leaving their owners holding Greek currency that would suddenly be worth 30 percent to 50 percent less than the euros they thought they had. Depositors in other struggling euro-area countries would start worrying that the same could happen to them, probably triggering an epic bank run with contagious effect.
As Barry Eichengreen, an international economist at the University of California at Berkeley, has put it: "This would be the mother of all financial crises."
If Wolfson's prize attracts a workable plan, we'd love to see it. More likely, it will demonstrate one of the perils of integration: It's much easier to add members to a currency union than it is to remove them. That's a lesson European leaders would do well to heed if the euro survives to the point where another country like Greece wants in.
(Mark Whitehouse is a member of the Bloomberg View editorial board.)-0- Oct/19/2011 21:32 GMT