{"id":166221,"date":"2010-01-11T14:10:20","date_gmt":"2010-01-11T19:10:20","guid":{"rendered":"http:\/\/blogs.wsj.com\/economics\/2010\/01\/11\/ecb-paper-explores-withdrawal-from-european-union\/"},"modified":"2010-01-11T14:10:20","modified_gmt":"2010-01-11T19:10:20","slug":"ecb-paper-explores-withdrawal-from-european-union","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/166221","title":{"rendered":"ECB Paper Explores Withdrawal From European Union"},"content":{"rendered":"

European Central Bank<\/strong> watchers are buzzing in their latest research notes over a recent ECB paper that explored the legal feasibility of withdrawal from the European Monetary Union<\/strong>.<\/p>\n

The paper<\/a>, with the tantalizing headline “Withdrawal and Expulsion from the EU and EMU: Some Reflections” was released over the holidays and cited in a recent Journal article<\/a> on Europe’s debt crisis.<\/p>\n

Written by the ECB’s legal counsel, it notes that “recent developments have, perhaps, increased the risk of secession (however modestly), as well as the urgency of addressing it as a possible scenario.”<\/p>\n

It concludes that unilaterally withdrawing from the European Union “would not, as a matter of public international law, be inconceivable, although there can be serious principled objections to it; and that withdrawal from EMU without a parallel withdrawal from the EU would be legally impossible.”<\/p>\n

As for expulsion, “the conclusion is that while this may be possible in practical terms — even if only indirectly, in the absence of an explicit Treaty mechanism — expulsion from either the EU or EMU would be so challenging, conceptually, legally and practically, that its likelihood is close to zero.”<\/p>\n

Though the odds of withdrawal or expulsion are very remote, the budget crisis in Greece has put the issue on the table, since its double-digit budget gap as a share of GDP is significantly above the limits set by EU budget rules.<\/p>\n

Still, as Deutsche Bank<\/strong> notes in a research report Monday, there is “no reason to expect member states to exit EMU.”<\/p>\n

Economists are increasingly dividing the euro zone into “core” economies like Germany, France, Italy, Belgium and The Netherlands — those that have emerged from recession — and “peripheral” countries like Ireland, Greece, Spain and Portugal that were the region’s main growth engines last decade but now face painful adjustments in terms of prices, state finances and labor markets.<\/p>\n

That divergence poses a dilemma for the ECB. As Deutsche Bank economists note, once the ECB starts raising interest rates — probably in late 2010 \u0096 there\u0092s an argument to be made that it “will be disproportionately detrimental to peripherals which will probably not enjoy the same pace of recovery as the core countries.” Tighter policy could even trigger a “double dip” in some of those countries, Deutsche Bank said.<\/p>\n

So while expulsion is good for shock value, the likelier — and almost as worrying — scenario may just be slow growth in Europe for an extended time with its growth engines sidelined.<\/p>\n

“The euro area will have to learn to live with a lasting drag from the adjusting peripherals,” Deutsche Bank said.<\/p>\n

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European Central Bank watchers are buzzing in their latest research notes over a recent ECB paper that explored the legal feasibility of withdrawal from the European Monetary Union. The paper, with the tantalizing headline “Withdrawal and Expulsion from the EU and EMU: Some Reflections” was released over the holidays and cited in a recent Journal […]<\/p>\n","protected":false},"author":850,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-166221","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/166221","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/850"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=166221"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/166221\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=166221"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=166221"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=166221"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}