Tuesday, August 09, 2005

Frankfurt calling Superman

Do you remember in the first 1978 Superman film, the action moves to the Hoover dam and we can see the first infinitesimal cracks appear in its great concrete mass. Just maybe that is where we are atwith that great economic lecturers experiment, the European Single Currency.

Anatole Kaletsky is no fool, so when he joins the bandwagon predicting the demise of Italian membership of the Euro then maybe people ought to take it seriously
What is more despite what they will tell you here in Brussels and in Frankfurt, there is no absolute impediment to Italain departure. As he says,
"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".

This article folows hard on the heels of Naill Ferguson's large OpEd in this week's Sunday Telegraph. "'Italy despairs of euro' - in normal times, it would be front page news"
This follows of course from previous comments here and elsewhere. And still things move onward. I wonder what the spread is for Italy's withdrawl?


Anonymous said...


Gothamimage said...

From NY, the Euro looks strong and it seems to make sense (for most countries) - When I read skeptic in England, the reasons for opposition, while often monitary-related, seem to be cultural.
Why should Italy quit?