It’s not cricket

While Forest Capie and Geoffrey Wood [History reveals breaking up a currency union isn’t hard, yesterday] think that the process of breaking up the euro could be a swift and relatively clean, the examples given do not involve the same levels of redemonination risk that a euro break-up carries. If you were to seek the redenomination of a liability, the most straightforward jurisdictions would be under common law or under New York law – as in the examples given of Scotland, New Zealand and the US. The lex monetae question becomes much more complex when outside these jurisdictions. In the example of New Zealand, there was bilateral support for the switch from sterling to the Kiwi dollar, resulting in relatively amicable agreements. It is difficult to see the Club Med countries playing in quite such a sportsmanlike manner.

Jim Cruthers