HUNDREDS of economists took up the challenge issued by Lord Wolfson last year – to come up with a practical plan for a country to leave the Eurozone, minimising the pain for it and the remaining members.
Five of those entries have made the short-list, which was announced yesterday, and, following further revisions on the guidance of the judging committee, one or two will win the grand prize – £250,000, to be announced in July.
A series of specific problems with the Eurozone’s current setup and potential break-up were identified by the entrants. Among the most prominent, a lack of competitiveness in the peripheral economies; political opposition to fiscal transfers; and the lack of a mechanism for determining contract arrangements if a country leaves the euro.
Market tensions in the Eurozone have slackened since the prize was first announced in October, largely because the European Central Bank pumped over €1 trillion (£835bn) in cheap cash into Europe’s financial institutions in December and February, and because Greece was bailed out for a second time.
However, the shortlisted economists believe this is largely a temporary fix, amounting to a liquidity boost which does not solve the underlying issues like the lack of competitiveness in the periphery.
“Sadly, the risk of a country leaving the Eurozone has not gone away,” said prize sponsor and Next chief executive Lord Wolfson.
“The ideas contained in these entries are an invaluable contribution to tackling this important issue. I am incredibly grateful to everyone who made a submission and look forward to awarding the prize this summer.”
The short-list was made up of economics consultants, authors, investors and analysts, who grappled with the complex tangle of legal, economic and political issues at hand.
Each of those will receive a £10,000 prize for making it this far, while four entrants who just missed out will receive £1,000 each.
They are Arnab Das from Roubini Global Economics, Charles Dumas from Lombard Street Research, Julian Le Grand from the LSE, and investment banker Michael Redican.
The judging panel, made up of economics professors and political advisors, also gave a special mention to the competition’s youngest entrant.
Ten-year old schoolboy Jurre Hermans recommended Greece leave the Eurozone and use the drachma once more. To prevent capital flight, Hermans recommends that any Greek trying to move cash out of the country or failing to exchange euros should face a fine “just as high or double the whole amount in euros he tried to hide”. He was given a €100 gift voucher for his entry.