Talks about abandoning the euro are intensifying among southern eurozone countries that need to regain competitiveness in the face of Europe’s growing fiscal problems. But a look at what abandoning the euro would mean in practice should put a damper to such talks, two economic experts say. Argentina’s experience in 2002, when Latin America experienced an economic crisis, provides the closest look at the possible scenario, Eduardo Levy Yeyati, an economics professor, and Mario Blejer, a former governor of Argentina’s central bank, argues in an opinion piece published on the Guardian. Despite differences between Argentina and southern eurozone’s economies, the Latin American nation’s experience provides lessons that European policymakers could ponder over, including the willingness to impose heavy restrictions of operations of commercial banks, restructure debts and introduce exchange and capital controls.

    The two experts add that European countries opting to abandon the euro are likely to experience a nastier and messier process because they would need to promote demand for their new currency from scratch, unlike Argentina, which never eliminated the peso as its main currency.

    About the author

    • Ma. Rizza Leonzon

      As a former staff writer, Rizza focused mainly on business coverage, including key donors such as the Asian Development Bank and AusAID.