Leaving the Eurozone

How can a country or countries leave the euro zone with the least possible pain?

The solution must be simple. At a particular moment, not previously announced, chosen by the country, all contracts denominated in euros within the country would be converted to new currencies: new drachmas, new marks, whatever. This includes all existing lease contracts, all credit market contracts, all mortgage contracts, all retirement contracts,  ALL contracts. When parties to these contracts are international, then they will suffer currency risk in the future. But this is a risk that cannot be avoided. There is an issue in terms of locating a contract; that is, how can one tell that a contract is “in” a particular country? First, the contract would be “in” a country if the payer is “in” the country. Second, the payer is “in” the country in which the payer is headquartered or has a principal residence.

How do you do something like this: create a secret moment for conversion? The legislative body would be called into secret session over a weekend. The moment, if the legislature approves, would possibly be at, say, 1:00 a.m. on Monday morning. The legislature would be kept in secret session until that moment if they have approved.

At the moment of conversion and not minute before, the converting country would begin to cause new coins and paper money to be designed, minted and printed; they could do it themselves or contract with private companies for this service. Of course, anyone with euros . . . meaning coins and bills . . . could continue to use them with others who wish to trade in euros.

This raises  the question of what the conversion rate would be between the new currency and euros. I would suggest that the initial rate at the moment of conversion should be one to one. After the moment of conversion, the rate would be determined by the market. This is what would give rise to currency risk. All the contracts with fixed prices would continue to be defined by the initial conversion rate, one to one or whatever is chosen by the country.