Speculative Eurozone Attacks and Departure Strategies
CESifo, Munich, 2018
CESifo Working Paper No. 7343
This paper shows that the eurozone payment system does not effectively protect member states from speculative attacks. Suspicion of a departure from the common currency induces a terminal outflow of central bank money in weaker member states. TARGET2 cannot inhibit this drain but only protects central bank assets. Evidence presented here suggests that a run on Italy is already on the way. The paper also considers departure strategies of strong and weak member states and the distributive effects of an orderly eurozone dissolution.
Monetary Policy and International Finance
Public Choice