How Ireland Can Leave The Euro: One Expert's View

Tyler Durden's picture


The following memo, which has fallen into our hands, is a draft of
advice to the new Irish Minister for Finance from a British colleague
who has a wealth of expertise on how to handle economic crises. He
prefers to remain anonymous for professional reasons.

Dear Minister,

Congratulations on your new appointment. As you read the civil
service briefings on the present crisis, you will come to appreciate
that Ireland's problems would be much easier to manage if your
administration could choose the country's own exchange rate and interest
rate. However, your officials and your colleagues may believe that
there is no practical way to leave the present European monetary union
and so achieve this flexibility.

In fact, there is. Leaving the euro is politically tricky and
economically costly in the short-term. But it is far from impossible.
The long-term advantages clearly outweigh the short-term costs, and the
politics can be managed. The following outlines how it can be done:

1. Announce on a Sunday morning that Ireland is “temporarily suspending” its euro area membership.

It is obviously vital that this announcement come as a surprise to
markets. So you cannot discuss it with many people in advance. The
Taoiseach and the Governor of the Banc Ceannais na hÉireann must
obviously be informed and agree. However, even discussing the idea in a
wider circle is likely to lead to leaks; in turn, this will cause a run
on Irish banks and a complete collapse of deposits, destroying what is
left of the economy.

2. As of L Day (Leaving Day), all Irish assets and
liabilities are denominated in the ‘Irish euro’, initially at the
exchange rate 1:1.

This means that there is limited disruption of cash. People will
continue to use euro coins with the Irish national side and euro
banknotes with the letter ‘T’ (for Ireland) in the serial number. You
thus avoid having to change ATMs or any other machines that take cash.
For the initial period of a fixed exchange rate (see below), Gresham’s
Law will operate and ‘non-Irish euros’ will disappear from circulation
in Ireland. You may later wish to take a leaf from the successor states
of the Austro-Hungarian Empire and stamp ‘Irish euros’ to highlight
their national character further.

3. Announce that there will be temporary exchange
controls pending a resolution of outstanding issues such as Irish
euro-denominated debt.

On this, you have a choice. You can announce that Ireland will honour
its euro-denominated debt until roll-over. This puts the exchange-rate
risk on you. Since a main reason for Ireland to leave the euro area
would be to devalue, this move would increase your debt, but would
facilitate any negotiations with your euro area partners. However, it is
an expensive route.

You may therefore prefer to announce that as of L Day (Leaving Day)
all external Irish euro-denominated debts are also denominated in the
‘Irish euro’. That puts the exchange rate risk on your creditors. It is
cheaper, though it leaves you open to substantial lawsuits.

The exchange rate will of course not remain fixed for long. Nor would
you want it to. But until the transition period is over, you may have
to rely on the black market (which you will, of course, criticise) to
provide you with accurate information about the appropriate Irish/euro
are exchange rate.

4. You should in any case now go for a default –
which of course you will describe as “a renegotiation of public debt”.
Since you will in any case devalue (which is a form of default) you
might as well get everything out of the way at the same time. Offer
creditors a (say) 50% haircut on any debt that is maturing over the next
few years; or a new bond maturing (say) 15 years down the line. With
any luck, they will take the 50% and run.

You will no doubt be told that if you do this, Ireland will be shut
out of capital markets for years, perhaps decades to come. Perhaps. But
if you have a primary budget surplus you will not need to borrow much
anyway. Moreover, history clearly shows that when the only threat your
creditors hold over you is that, should you default, they won’t lend you
any more money, then you should default at once. In any case, knowing
international markets, they will realise that the combination of
default, devaluation and a return to being able to set a monetary policy
suitable for Irish needs, will actually give a boost to the economy.
They will therefore be eager to lend.

5. One last thing. You will eventually want to move
away from ‘Irish euros’ to a proper national currency (you can still
keep notes and coins looking the same to ensure that cash machines will
work). When you do, I suggest that you do not tie your currency to any
other currency – the whole point of this exercise is to be able to
conduct an independent monetary policy in the interests of Ireland.

Yours faithfully,


cc, mutatis mutandis, to Ministers of Finance of Greece, Portugal, Spain and Italy – and Germany.

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gorillaonyourback's picture

makes good sense to me, get nigel farage's opinion as well

prophet_banker's picture

When you go into a bank to buy a mortgage, understand you are not borrowing other peoples money, that would be illigal with fractional reserve banking; new money is created with everybank loan.  A better fix for Ireland would be to take all government funds out of private banks, incorporate the state bank of ireland, and leverage government funds into the economy as loans, with state bank dividends put to offset tax receipts.


Bankers would have us believe it is their sole right to conjure into existence our money supply, and they tell government that it should not be in the banking business, and that money creation is best left to banks.


Government should tell the bankers that money creation is the greatest sovereign authority of government, and banks should get out the government business of money creation. This should be a policy referendum to be voted on. Long live the State Bank of North Dakota, and the others that are soon to follow.

Michael's picture

Everything The Irish need to know, how to tell the international banksters to fuck off, has already been figured out.

Why reinvent the wheel.

Red Ice Radio - Birgitta Jonsdottir - Pt 1 - Financial War Against Iceland

Red Ice Radio - Birgitta Jonsdottir - Pt 2 - Financial War Against Iceland

Red Ice Radio - Birgitta Jonsdottir - Pt 3 - Financial War Against Iceland

Red Ice Radio - Birgitta Jonsdottir - Pt 4 - Financial War Against Iceland

Red Ice Radio - Birgitta Jonsdottir - Pt 5 - Financial War Against Iceland

Red Ice Radio - Birgitta Jonsdottir - Pt 6 - Financial War Against Iceland

THE DORK OF CORK's picture

Yes  - there is a huge trade surplus in Ireland now (although it is primarily due to multinationals food price rises have also  greatly helped )

In fact on a per ca pita basis it is much larger then Germany

The depression in Ireland is merely a balance sheet banking construct although a increase of domestic demand via a central bank filling in the credit black hole would narrow the above surplus.

A state industrial bank could also serve to increase domestic demand via internal capital formation rather then consumption - the building of sugar factories knocked down in the interests of property speculation come to mind and would be a start.

Unfortunetly the new coalition will sell off the remaining state assets such as power stations at knock down prices - once the ECBs client multinationals get these remaing jewels they will then increase the money supply so that these new power stations can make a profit from this new "surprising" demand increase.

Very very sad.

Doeko's picture

Wtf this is ridiculous. You can't create a new currency overnight without barely anyone's prior knowledge and not expect basically the world to end.

Spitzer's picture

Thats right. They started designing the Euro in 1962

Doeko's picture

Either way, while I don't believe this could possibly come from any political figure let alone someone in the finance ministry of the UK, I won't pass by this opportunity to say what a goddamn trojan horse the UK has been and is to the EU. Should've never let those complainy, whiny gits into the union. Would be so much better off if Nigel Farage had his way.

virgule's picture

This never-ending euro-bashing on ZH strikes me as odd: every argument put forth could be applied to the states of the United States, as a possible element of a way forward - but somehow this aspect never makes into the debate.

I'd love to see a point-by-point comparison of the implications of a state leaving it's currency zone, for both zones.


slackrabbit's picture

cool...then about how telling the 'EU powers that be' to tell the bond holders take 1 cent in the dollar haircut, for Ireland NOT to do this.....suddenly a country is blackmailing the

YHC-FTSE's picture


Falls flat on his face at point 1. "will cause a run on Irish banks and a complete collapse of deposits, destroying what is left of the economy" . What a great strategy. Not. 

Spitzer's picture

Nobody is leaving the fuckin Euro, its not going to happen. That is why the Euro will out live the dollar. What is right with it is what is wrong with it.

topcallingtroll's picture

Offer ireland iceland and greenland NAFTA membership.

I seriously doubt that the northern euro countries will permanently subsidize their south. I wouldnt be so confident about the euro.

Spitzer's picture

You know it.

We can see the whole Euro zone in a long drawn out fight about monetary policy. Compare that to the US where one asshole just decides how much money to print and how much bonds to buy.

By the time the ECB decides on anything, Bernank will have flooded the world with dollars. Its happening right now.

The Eurozone is trade nuetral, a net creditor

The Eurozone has the largest gold hoard, not the US.

The Eurozone is China's largest trading partner, not the US.

The Euro has allot going for it.


barliman's picture


Excellent! Twenty nine words to put forward three unsupported propositions although the third one is more faux zen than insight. Let's back up a few steps ...

1. "Nobody is leaving the fuckin Euro ..." - grew up in mob land. This is so reminiscient of how they phrased their threats when they were threatened. Aside from that, WHY is no one leaving the Euro? Social sentiment in the individual countries is so strongly in favor of it? One common currency is working out so well for Greece, Ireland, France, Germany, Spain ??? (pick one or more)

2. Based on unsubstantiated number 1, and ignoring the possibility of multiple sovereign defaults, WHY will the Euro live out the dollar? Underlying asset values in the Euro countries are greater than in the United States?

3. "What is right with it, is what is wrong with it." - FIFY, you really need the punctuation. Self contradictory but sounds snappy, doesn't it? It may have a number of things right but the hundreds of trillions of dollars in leveraged CDS's, CDO's, etc are likely to render everything else moot since the Euro itself is not backed by PM's, oil, corn, rice, wheat or any other hard asset. History in Europe says, "When one party owes money to another party and doesn't pay it back, war is not far off."

You may have some valid points ... but you haven't made them yet.



Bearster's picture

+1 for a righteous takedown.  + another 1 for a great one-liner "you may have some valid points ... but you haven't made them yet."

Spitzer's picture

1)Haha,social sentiment. There is a reason why the average person should have no say in monetary policy.

2)We all know about the swap lines from the Fed to EU banks. This makes little sense, aside from system risk and really that could be the ECB handling it. However if looking at Freegold  there is a rational. The EU banking system could is holding the $IMFS hostage. "Give me dollars or we pull the plug now and kick on freegold". I could still see them putting a bid in for gold, but it would make sense why the Fed is basically handing them dollars. Kick the can and all. I notice Trichet is remarkably cool with QE2 while the rest of the world is screaming bloody murder.

3) The Euro is not backed by gold but the ECB marks its gold holdings to market on the international reserve side of its balance sheet every month while the Fed has no gold and the treasury has theirs marked at $42.00. Its called Freegold. A fall in the dollar is captured by the Euro.

barliman's picture


Ok, you don't have a clue ...

1) Good news, you will be rewarded for your elitist attitude some day soon.

2) How will they demand anything if the dollar has folded? Trichet is cool with QE2 ...

3) A fall in the dollar is captured by the goods and services offered by the E.U. and impacts their trade balances, cost of living adjustments (inflation will destroy E.U. competitiveness in global trade as it is passed through in 2012 and beyond) ...

Your understanding and judgement is appropriate to your chosen username.



Spitzer's picture

1)Taking the punchbowl away doesn't require an elitist, it just requires someone who knows something about money.

2)The world will be forced to use the Euro when the dollar folds. What else is there ? It is the first non nation state currency. Just tell me what else there is.

3)The dollar is being hyperinflated as we speak, the Euro is not. The EU does not have reserve currency status to lose, the US does. Anything that happens to the EU will be that much worse in the US.

This is over your head.

baby_BLYTHE's picture

Speaking of THE VIEW... anyone catch AJ?

He talks about the Banks, the audience CHEERS!

Michael's picture

Thanks. I thought he was out of town. No new show on Sunday and today.

Boy that was beautiful. AJ's got those bitches number trying to narrow the discussion. AJ was having none of that.

Bryan's picture

This guys first mistake is assuming that politicians listen to reason over immediate political gratification.

StychoKiller's picture

Hmm, will the Irish Mafia be allowed to leave the syndicate?  The World wonders...

Zeilschip's picture

Ireland should join the British Pound. That will really fuck them up.

Byte Me's picture

The old Punt was tied to the Pound for decades. Worked until it didn't.

Lets Hang Parliament's picture

But beats linking to the green back!!

topcallingtroll's picture

It could work.

We should then immediately offer NAFTA membership to ireland iceland and greenland.

Sudden Debt's picture

I already said this 2 months ago.

These new euro's exist already.

I've bought one of those proof coins on a auction, and the way they differ is the size of the coins.

The logic is:

Normal money is backed up by something (mostly gold).

You'll have union backed coins


You'll have country backed euro coins.



You can print/coin money but by a metal that backs up the value as is.


Now, everybody thought this to be silver, but as there is a supply problem with that they'll try a CU/NI coins 150% of the size of the current coins.

If those will fail, the second option will be (I can't remember the name) but a blue metal looking coin.


themosmitsos's picture

Once again, continuing the Anglo-American idiotic fantasy of EU disintegration. Keep dreaming

disabledvet's picture

"Of Deathheads and gold-fillings."  There is indeed "always a solution" isn't there.  I am curious about the "transition period" presented in this wonderful missive--we talkin' seconds?  or nano-seconds?

gwar5's picture

Not a fantasy, just seems to be unraveling. Don't pull on any strings on the fringe or it all goes

Attitude_Check's picture

RIIIGHT,  ignore the fact that Greece will never pay it's debts under any plausible scenario, ditto Portugal, Spain, and Italy.  Ignore the likely Irish public response when the pain of the forced IMF German/French bank bailout at the expense of the entire Irish country.  Continue to play dumb as this financial crisis re-awakens nationalism on the continent!


I'm sure it will all turn out OK in the end.

gwar5's picture

I vote for the cheaper option, countersue preemptively in a special Irish Kangaroo Debt Court in Belfast, and tell them to fuck off. I would also add a #6 to the list below:

"You may therefore prefer to announce that as of L Day (Leaving Day) all external Irish euro-denominated debts are also denominated in the ‘Irish euro’. That puts the exchange rate risk on your creditors. It is cheaper, though it leaves you open to substantial lawsuits."

6. Announce that L Day (Leaving Day) shall henceforth be an annual Irish National Holiday known as "Banker Independence Day" with free beer for everybody.

hamurobby's picture

6. ... with free beer for everybody.


And that would leave ereyone, well, pissed.

Then they could then piss off instead of fuck off.

And if they dusted off their damascus shotguns and could find shells that would still fire, they could dare someone to cross the channel to enforce the euro.

I promise I wont post for another three days.

New_Meat's picture

From Bloomberg's "Inside Surveillance" today:

"Philip Lane, Professor of International Macroeconomics at the University of Dublin's Trinity College, says the electorate in Ireland "punished the ruling party, but gave a resounding vote for the same policies."

Sometimes, they post excerpts here:

otherwise, it is a subscription through iTunes.

I guess when a Professor of International MACROeconomics speaks, that's kinda' like a very special version of an economics PhD.  'cuz what he did say was nothing like what has been posted hereabouts.

- Ned


falak pema's picture

Ireland has only one real solution : win the world cup of rugby, and her problems are over. We will all buy irish beer and come live in ireland. No more  real estate nightmares. Even the Kiwis will use dublin as their local headquarters for their european tours. The answer lies in the soil...plant potatoes and barley or wheat and you'll make a ton of money. In China which lacks food.

baby_BLYTHE's picture

I have a solution... It has been with all of us since the school yard.

Sean7k's picture

The problem with default is two fold: one, it benefits the people at the expense of the bankers and investors. Two, it cuts the politicians off from the money spigot. Government would have to live within the value of it's national production.

Did I say problems? Perhaps solution would have been a better word...

disabledvet's picture

maybe they could change their name to "Iceland" and nobody would notice?

toto's picture

will work for food.

Another way out.

pappacass's picture

Ireland will not do anything to rock the European boat, Inda has already been to Brussels and knows whats expected of him.  It's his chance to get on the gravy train now.  The election has left us with a sence of dread as things will now only get worse.  Privitisation of everything left thats nailed down and sold back to the dumbass population who are walking around with 1000 yard stares not realising their pants are down but grateful for all the bars of soap littered around outside the banks, even if there is a sharp pain in the buttocks everytime one bends down to pick one up.

Thank God the news keeps telling us that things will be 'alright', eventually..

barliman's picture


"Ireland will not do anything to rock the European boat, ..."

WOW! Really?!? Leaving behind voting down the European Union constitution in the recent past, are we? Blowing up stuff in Britain for 60+ years not covered in your schooling or conveniently forgotten?

Let's test your bollocks, shall we? Walk into any pub frequented by the Irish and repeat your " ... the dumbass population who are walking around with 1000 yard stares not realising their pants are down but grateful for all the bars of soap littered around outside the banks, even if there is a sharp pain in the buttocks everytime one bends down to pick one up." crap ... but make sure your affairs are in order before you do it.



Spitzer's picture

The more they fight, the less they will have a chance to  fuck things up

barliman's picture


Please go into politics or MSM were you may find an audience for your vacuity.

Here's one for you to Google:

"All political power grows out of the barrel of a gun."



Steroid's picture

I was looking for one word in the proposal: GOLD. Not even mentioned.

Whoever proposed this forgot that these are politicians. They will screw any and every currency up if they keep it under their control.

dirtydroog's picture

I'm sorry but this is horseshit.

Here's some un-anonymous legal opinion on what it takes to leave the Euro


RoloTomassi's picture

this strategy is retarded