London team wins prize for study of euro exit

Associated Press + More

LONDON (AP) — A top British economic consultancy has won the 250,000 pounds ($390,000) Wolfson Economics Prize for its proposal on how a country can leave the euro.

The award to Roger Bootle and his team from Capital Economics was announced Thursday by the Policy Exchange, a London think tank.

The winning paper, judged the best of 425 entries, argued that the exit of one or more members from the eurozone would have a net positive effect for the current members and for the world at large.

"People may disagree on whether leaving the euro is a good thing, but the contribution of the Wolfson Prize has been to demonstrate that it can be done," Bootle said.

The winning paper proposed that a country leaving the euro should disclose its plans just three days before acting, preferably announcing on a Friday.

The authors proposed that the new national currency should be exchanged for euros on a one-for-one basis, and all wages, prices, loans and deposits would be redenominated one-for-one. The country should be prepared to accept a swift fall in the currency's value, the authors said.

They also recommended that the government redenominate its debt in the new national currency and seek to renegotiate the terms of its debt, which could include a substantial default.

The prize is sponsored by the Charles Wolfson Charitable Trust and administered by Policy Exchange.

"The prize was offered in the unshakable belief that the more thought and preparation that goes into a break up, the less damaging a collapse would be," said Simon Wolfson, chief executive of the Next retail empire and grandson of the late Charles Wolfson.

"The multiple attempts to stabilize the euro appear to do little more than re-finance the unsustainable borrowings of the euro's weaker members," he said, but "nothing has been done to address structural problems of these stricken economies."

In April, the prize sponsors awarded a special mention to an 11-year-old Dutch boy who drew inspiration from pizzas to propose a solution for Greece to exit the euro.

"The Greek man gets back Greek drachme from the bank, their old currency. The bank gives all these euros to the Greek government," young Jurre Hermans proposed.

"All these euros together form a pancake or a pizza. Now the Greek government can start to pay back all their debts, everyone who has a debt gets a slice of the pizza."

___

Online:

http://www.policyexchange.org.uk/images/WolfsonPrize/wolfson%20economics%20prize%20winning%20entry.pdf

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.