Выход из зоны евро

The Euro zone exit plan

Abstract
Introduction
Today the EU is facing the financial challenge which is shaking the world financial markets and affects negatively the world economic growth. While the European leaders are trying to resolve the problem economists predict the collapse of the single currency and sovereign bankruptcies of the heavily indebted states. The possible solution to the problem could be the exit of some of the euro zone members. In this paper we will elaborate on the possible solutions for the European debt crisis, as well as painless exit of some member states from the euro zone. In spite of the bear markets, downgrade of the some sovereign states (i.e. Belgium) and a possible downgrade of ECB issued obligation we try to remain positive and presume the problem in a positive light. We believe that the problem that EU is facing today is a problem of liquidity due to excessive debt issuance and inability to repay it, but not the problem of insolvency.
Problem Statement
The general government debt of the EU 17 was 7822.4 EUR billions by the end of 2010 (Appendix A, Table 1). From the table 1, the most indebted nations are Greece, Italy, Portugal, Ireland and Spain. Some of the mentioned member states had already received aid from the EU within the past year, for instance, Ireland, Greece and Portugal. The main problem of the high indebtedness of the mentioned states is the contagion of the problem to the other member states. The European member states are exposed to each other on a larger or a smaller scale by holding each other’s debt obligation. Recently the markets saw increase of the Italy borrowing costs which also increased yield of French bonds.

The EU applied solution of providing the financial aid to indebted sovereign countries so far was not successful, because this aid resulted in a higher debt and higher costs to support. Borrowing additional money to indebted member states just escalated the situation, i.e. Greece. Greece reached the limit where it was no more able to support the existing debt and had no means to reduce it. To avoid bankruptcy EU members agreed to write-down 50% of Greece issued obligations.

If the EU banking system is stable enough to survive 50% write-down of Greek obligation, would it be stable enough to survive another write-down, for instance, of Italian bonds? The provision of the financial aid as well as write-downs provides the minor and temporary solutions to the problem, but does not result in problem elimination. In the following section we would explain our offered solution that would eliminate the debt of the euro zone and insure prosper development of the EU.


Methodology

The European Stability Fund
The creation of the European Stability Fund would provide control over the existing debt. The size of this fund should be equal to the gross debt of the euro zone. Every member state would contribute equally to this fund, taking into account the economic conditions of the member states, its existing debt and its ability to pay (the details on the calculations are provided in Section…). The contribution of every member state would be divided in yearly fees. The ECB would issue the 30-years stability bonds for the total sum of the gross debt (which is equal to the size of fund). Every sovereign country would exchange the newly issued bonds by the bonds issued by sovereign states of the EU, which are held by the commercial banks and other financial institutions of sovereign states.

The creation of the European Stability Fund and the exchange of the existing sovereign obligations by the ECB issued 30-years stability bonds would positively influence the markets. The commercial banks and other financial institutions that today hold the downgraded sovereign bond (junk or illiquid bonds) would receive the higher quality debt obligations and would be able to insure higher stability of the financial system. The financial institutions would also avoid bad debts and possible bankruptcy threat in case of bankruptcy of the sovereign indebted states. To conclude, this fund would ensure the stability and soundness of the EU financial system, which is vital for the economic development.

The main condition
The offered plan requires fiscal adjustments of the EU treaties as well as sovereign legislations. To avoid the moral hazard of the newly created system all governments should be prohibited legislatively on the sovereign level and on the European level to issue the new debt. These measures should be taken to avoid the abuse of the system, since after its creation all governments would be equally liable for the debt of the whole euro zone. By limiting the government in the new debt issuance, government would lose the possibility to borrow from commercial banks or sell debt obligations. (Since the government would now be limited to its collected budget it should pass the development of the social-economical problems to the private firms, that would have means to borrow on the open market)
Painless exit from the euro zone
Following our discussion, the governments would become free from the previous obligations; they could exit the euro zone or stay within it. The exit from euro zone would not have effect on the present state of the economy of the country which is leaving the euro zone, as well as on the countries staying in the euro zone.
The main idea
The ECB creates the stability fund of the size equal to the gross debt of the EU. Every member of the euro zone pays a certain fee every year.
The ECB issues the 30-years Euro bonds for the total sum of the gross debt of the euro zone.
The ECB exchanges Euro bonds for the bonds issued by sovereign states of the EU, which are held by the commercial banks and other financial institutions of sovereign states.

The main condition
The sovereign governments of EU should be limited legislatively in an issuance of the new debt. This means that the governments have no rights to borrow in the commercial banks. The social-economical problems should be developed not by the government, but by the private firms, which would borrow in the open market.

Conclusion
Since the governments would become free from the previous obligations, they could exit the euro zone or stay within it. The exit from euro zone would not have effect on the present state of the economy of the country which is leaving the euro zone, as well as on the countries staying in the euro zone.

The Problem statement
The measures offered in our plan require political responsibility. This project is a new approach to the dynamic development of Europe. The critical moments of the new plan are: the deficit less budget and the ability to write down the debts from the governments of the European countries. These two critical moments would allow painless exit of any country from the euro zone and would also save Europe from the debt crisis. The further analysis would show that the possibility and the mechanism of the debt write downs provide the answer to all questions posed by the competition organizers.

The deficit less budget
We propose to convert the debt of the sovereign countries of the EU into debt obligations of the ECB. The sovereign debts are distributed unequally among the European countries. Not every country could pay back the amount of debt it has accumulated. The consolidation of all debts would allow equalizing of the financial situation in the whole EU. To prevent the similar situation in future the governments should be limited in debt issuance by the legislation passed on the EU level. This restriction would force the governments to pass the deficit less budgets.

The debts write down
The release from the sovereign debt would allow the countries to start from the beginning their economic politics. Since the governmental debt would be converted to the debt obligations of the ECB, which in its turn would write it off at the expense of the stability fund, the government should take into account only the real state of the economy for the budget formation and social programs. This could be done applying the calculations of N. Kondratjev and the method of the J. Tobin. The exact calculations of the money supply and the purchasing power parity would allow transition to a new currency. The transition under the mentioned conditions would not have the negative influence on the existing savings, which at the moment of transition are denominated in euro. Another important side of the transition to a new currency is mortgage credit held by the population. It is necessary to provide legislatively for the population the free transition of the mortgage credit in a new national currency. Under the devaluation of the new currency or inflation there would be a pressure on banks. Under these conditions the fulfillment of the mortgage credit would cause losses for the population.  In case the government would be able to control the inflation and do not allow the devaluation of the new currency then the fulfillment of mortgage credit is possible without any losses for banks and the population.

The exchange rate
When the country will leave the euro zone special attention should be given to the new exchange rate. To avoid uncertainty the exchange rate of a newly created currency should be pegged at a certain level to the euro like it is done in Baltic States. The fixed exchange rate would help to maintain the level of the competitiveness due to elimination of the exchange rate risk. Different currency would create additional transaction costs, but since the exchange rate would be fixed the bid-ask spreads will not be large since there will be no volatility in the exchange rate. Since the transaction costs would be very small, it will not affect the trade significantly, so the expected decrease in trade would quantify to 0.3% maximum.
The fixed exchange rate would insure the stability of prices and there would not be any decrease in liquidity. The price stability would also keep inflation under control.
  The freedom of capital should be maintained.
Fulfillment of the international obligations
The government would need additional and specific measures for the fulfillment of the international obligation, in case it would be following our offered plan and would be converting its sovereign debt in the debt obligations of the ECB. The country would have to balance the budget and change the legislation regarding its budgetary politics.

The Banking system
The stability of the banking system would secure the development. Today the banking system of the EU is in a risk zone because of the high sovereign debt of the member states. In order to return to stable development it is necessary to strengthen the banking system. This is possible through the conversion of the bad debts into the debt issued by ECB. In this case the banking system will receive assets instead of debts and losses. In the transition to the national currency the financial system would remain stable and open for development.

The Stability and Growth Pact was designed to enforce the fiscal discipline within EMU and ensure sustainable public finances. The SGP controls the government deficit and debt (that should be less than 3% and 60%). The SGP was not enforced strictly and led to the debt crisis. In future SGP should be backed up legislatively by every member state as well as on the European level. 
 
The painless exit
The painless exit from the euro zone in directly connected with the sovereign debt of the country. If this is not the case the situation might lose control. The different countries of the EU have different sovereign debts. There are countries that can fulfill its debt obligation, but there are other countries that are close to default. Because of that during the conversion of the sovereign debts into the debt obligations of the ECB the possibilities to pay of each country should be taken into account.

Devaluation & Inflation
The devaluation and inflations are directly connected with the imbalanced budget and high debts. Since in our project we are excluding the debts and the imbalanced budget these conditions would allow to control the inflation and to prevent the devaluation.

Sustainable Development
These measures open up the possibility of the sustainable development. It is also important to consider different terms of preparation for the exit from euro zone. This is connected with preparation and the adoption of the statutes, which would limit the government to borrow, securing the adoption of the balanced budget and the calculations of the money supply. Various political, demographical and cultural traditions require consideration and time for realization of the plan described above, during the transition to a new currency.

Institutions
We do not see the institutional problems during the transition to the new currency. There is no need of creation of the new institutional bodies. The existing financial institution could coordinate the financial system on the basis of new currency.

Mistakes of the past
The important example of the transition to new sovereign currencies is the creation of the new countries on the space of the USSR. All new countries repeated the same mistake while adopting a sovereign currency. Beginning the financial history without the debts the government was not limited in adoption of budget, in the borrowings from the market. Following the populist policies the government did not take into account the consequences of its actions. Some countries used groundless money emission, which later led to uncontrollable inflation and later to devaluation of the currency.

 The mistakes of the mentioned countries were taken into account and allow us to create a plan that would help to avoid these mistakes. The nil debt with a realistic budget and limited credit for the government would secure not only confident transition of any country to the national currency but as well the stability of the euro zone. The money that is now being spent on the support of the debt could be spent on the sustainable development which could be used for the creation of the new work places and the strengthening of the national currency. Every year EU countries spend more than 60 milliard of euro on the support of the sovereign debts.

Possible obstacles
Today there are many discussions about the issuance of the ECB bonds and a lot of controversy about the fact that ECB is buying the debt of the troubled countries. The issuance of the ECB  bonds would result in a higher costs of debt insurance for Germany, France and other countries without excessive debt. ECB bonds issuance yield would be an average of the yields of all EU states. This yield would be advantageous for countries like Greece, Italy and Spain, but would create a higher cost for Germany, France, etc. This project would result in new debt issuance which is the opposite of our offered idea.

Our offered plan is to exchange all issued debt obligations of all EU states, and prohibit them from issuance of new debt obligation legislatively. 



План выхода с наименьшими потерями из зоны евро

Преамбула
Все долги правительств 27 стран ЕС составляют примерно 2,7 трлн. евро

Идея
- ЕЦБ создает фонд на сумму всех долгов 2,7 трлн. евро. Взносы в фонд каждый год вносят страны ЕС в течении 30 лет.
- Под долги стран ЕС ЕЦБ выпускает свои обязательства на сумму 2,7 трлн. евро с погашением в течении 30 лет.
- Свои обязательства ЕЦБ обменивает на обязательства правительств 27 государств ЕС, которые есть в коммерческих банках, других финансовых институтах и в ЦБ государств ЕС.

Обязательное условие
Законодательно правительства стран ЕС ограничиваются в получении кредитов. С этого момента они не имеют право занимать в коммерческих банках. Если они хотят развивать свои социально-экономические программы, то это должны по их поручению осуществлять частные фирмы, которые и занимают средства на свободном рынке.

Вывод
Так как правительства становятся свободными от прошлых обязательств, то они могут выйти из зоны евро или остаться в ней. Выход из зоны евро не будет влиять на экономическую конъюнктуру ни страны, выходящей из зоны евро, ни других стран, остающихся в этой зоне.

Расчеты
2,7 трлн евро / 30 лет = 90 млрд евро / 27 стран = 3,3 млрд. евро в среднем с каждой страны в год. С учетом реальных экономических возможностей доля каждой страны рассчитывается индивидуально.



Анализ проблем
Те меры, которые предлагаются в этом проекте, требуют от политиков ответственности и воли. Предлагаемые нами меры - это новый подход к динамичному развитию Европы. Ключевыми моментами нового подхода являются без дефицитный бюджет и возможность списания всех долгов с правительств европейских стран. Именно эти два момента позволяют безболезненно выйти любой стране из зоны евро, но также выводят Европу из финансового тупика. В дальнейшем анализе мы покажем, что именно возможность и механизм списания долга является определяющим во всех вопросах, которые были поставлены организаторы конкурса.
 
Мы предлагаем конвертировать долговые обязательства суверенных долгов стран ЕС в долговые обязательства Европейского Центрального Банка. Суверенные долги неравномерно распределены по европейскому пространству. Не каждое государство может выполнять взятые на себя социальные обязательства. Консолидация всех долгов позволить выровнять финансовую ситуацию на всем европейском пространстве. Для того, чтобы ситуация не повторилась в будущем, правительства должны быть ограничены в получения кредита на базе единого европейского закона. Такое ограничение заставить правительства перейти к без дефицитным бюджетам. 
 
Освобождение от суверенного долга позволяет всем начать с чистого листа свою экономическую политику. Так как государственный долг будет конвертирован в долговые обязательства Европейского Центрального Банка, а последний их списывает, за счет фонда, то государство должно будет учитывать только реальное состояние экономики для формирования бюджета и социальных программ. Это выполняется по расчетам Н.Кондратьева и методикам Дж.Тобина, которые мы надеемся доступны для специалистов экономических министерств суверенных государств ЕС. Точные расчеты по денежной массе новой валюты и паритету ее покупательной способности, то есть обмененному курсу, позволят осуществить переход к новой валюте. Переход при таких условиях не окажет отрицательного влияния наденежные сбережения, которые на момент перехода храниться в евро. Другая ситуация возникает при переходе на новую валюту с ипотечным кредитами. Необходимо законодательно предоставить населению свободный переход на исполнение ипотечных кредитов в новой национальной валюте. При девальвации новой валюты или инфляции это будет оказывать давление на банки. При этих же условиях исполнение ипотечных договоров в евро вызовет потери населения. Если же государству удается удержать инфляцию и не допустить девальвации новой валюты, то исполнение ипотечных кредитов возможны в любой валюте без потерь для банков и населения.
 
Дополнительные или специальные меры не понадобятся правительству по исполнению международных обязательств, если будут выполнены наши предложения конвертировать суверенный долг в обязательства ЕЦБ и сбалансировать бюджет и поменять на уровне законодателя бюджетную политику.
 
Стабильность банковской системы обеспечивает развитие. Сегодня банковская система Европы находится в зоне риска из-за большого суверенного долга стран участниц. Для того чтобы вернутся к стабильному развитию необходимо укрепить банковскую систему. Это возможно если конвертировать плохие долги, обусловленные суверенным долгом, на возвратный долг ЕЦБ. В таком случае банки вместо долгов и убытков получают актив. При переходе на национальную валюту финансовая система остается устойчивой и открытой для развития.
 
Безболезненный выход из зоны евро напрямую связан с суверенным долгом государства. В противном случае ситуация может выйти из под контроля. В разных странах евро зоны разные суверенные долги. Одни страны могут исполнять свои обязательства другие стоят на пороге дефолта. Поэтому для облегчения задачи перевода суверенного долга в долги ЕЦБ необходимо учитывать возможности каждого государства. Но перевод суверенного долга в долги ЕЦБ - результатам.

Девальвация, инфляция напрямую связана с не сбалансированным бюджетом и большими долгами. Так как мы в своем проекте исключаем долги и не сбалансированный бюджет, то именно эти условия позволяют контролировать инфляцию и не допускают девальвации. Эти условия и меры открывают возможность устойчивого развития.
 
Для различных стран необходимо предусматривать разные сроки подготовки для выхода из зоны евро. Это связано с подготовкой и принятием законов, которые ограничивали бы правительства во заимствовании, обеспечивали принятие сбалансированного бюджета и расчетов новой денежной базы. Различные политические, демократические и культурные традиции требуют взвешенного подхода и времени для реализации планов перечисленных выше, при подготовке перехода на новую валюту.
 
Мы не видим институциональных проблем при переходе на новую валюту. Нет необходимости в создании новых государственных институтов. Всех государственных институтов действующих сегодня достаточно для управления финансами на базе новой валюты.
 
Ярким примером перехода на новые суверенные валюты является создание новых государств на пространстве СССР. Все новые страны повторили одну и туже ошибку. Начиная свою финансовую историю без долгов, государство не было законодательно ограничено ни в формирования бюджета ни во заимствованиях на внешнем рынке. Приводя популистскую политику законодатель и правительство не заботилось о последствиях. Более того некоторые страны прибегали к необоснованной эмиссии денег. Это приводило к неконтролируемой инфляции и в конечном счете к девальвации новой валюты.
 
Это учтено в нашем проекте. Нулевой долг с реалистичным бюджетом и ограничением кредита для правительств, обеспечат не только уверенный переход любой страны на национальную валюту, но и устойчивое развитие всего Европейского Союза. Те средства, что страны сейчас тратят на обслуживание долга, вполне хватит для устойчивого развития и которые могут быть направлены на создание новых рабочих мест и укреплению новой валюты.  Ежегодно страны ЕС тратят более 60 млрд евро на обслуживание суверенных долгов.