Even if it is a debatable question whether or not the Iraq war is bogged down in a quagmire, Italy’s economy evidently is. And no-one has even gotten round to offering a plan ‘b’, not even Tony Blair himself. So the silence is deafening, and this simply leads to increased speculation. Berlusconi only pronounced publicy on the issue last Tuesday, nearly three weeks after Maroni’s referendum call. Latest on the list of those taking a long hard look is Bloomberg’s Mark Gilbert, who has dug out an old paper by legal expert on international financial systems Hal Scott.
The key points:
“Countries have kept their own payment systems, government debt instruments, central banks, and the lion’s share of their foreign-exchange reserves,” wrote Hal Scott, professor of international financial systems at Harvard Law School, in a 1998 paper. “It is almost as if the EMU countries have hedged their bets on EMU by retaining the key institutions needed to re- establish their own currency and monetary policies if need be.”
Scott’s paper, titled “When the Euro Falls Apart,” went on to ask “would foreign law, if applicable, such as the law of the U.S. or Germany, enforce the re-denomination or provide instead that the contracts must be honored in euros or are breached if not honored in euros? This is far from clear given the lack of precedents.”