Translated from the French by Tim Gupwell

In my articles here, I generally address myself to anyone who wants to read me, but just this once, I would like to direct my address to my fellow financial engineers, and moreover in a tone – also just this once – of provocation which is blatant but, let us hope, efficient as well.

Here we go: a monetary zone has to be able to default in its entirety and restructure its debt (namely, to be able to say, “I can only pay back X centimes for every Euro I have borrowed”) and it also has to be able to re-evaluate its currency, and, in particular, to be able to devalue it.

The Eurozone has deprived itself of these two medicines. Hardly surprising then that today it is terminally ill.

The Solution: next Sunday evening (before Tokyo opens), the entire debt for all 17 countries in the Eurozone will be re-baptized Eurodebt (French OAT bonds, German Bunds, etc.) and the following minute, the Eurozone as a whole will default.

On Monday morning, the Eurodebt will be restructured (in one go) and the exchange rate between the Euro and other currencies will be allowed to adjust naturally.

The Eurozone will have carried out its metamorphosis. It will now be able to function like any other ordinary monetary zone. It will have been saved.

PS. Would all those commentators who are likely to say that we would be better off not saving the Euro please take your comments elsewhere; I am not talking here of either a ‘for’ or an ‘against’.



  1. In einem einheitlichen Währungsraum muß es die Möglichkeit einheitlicher Schuldenaufnahme geben – genauso wie die einheitliche Steuererhebung.

    • Das wird, so fürchte ich, graue Theorie bleiben. Die nationalen Unterschiede sind immens, und die Staaten sind unabhängig. Man will zwar von der EU/Eurozone profitieren, aber nicht die eventuellen, aber immer möglichen Belastungen schultern.

  2. Concerning the approach suggested by Paul Jorion, I think that Merkel (the german gouvernment) would not be seduced. Unfortunately, there are no link between political goals in Europe and such innovative initiatives.

  3. What you are suggesting here is actually three separate measures: that the soverign debt of the 17 be pooled, that the Euruzone default on the pooled debt, and that the Eurozone take measures to devaule the Euro on the world market.
    The usefulness of the first should be clear to anyone who has been following the crisis.
    But why would the Eurozone as a whole not be able to support the combined debt of the 17 and therefore need to default?
    And what makes you thing that the Euro is overvalued? The usual symptom of overvaluation is a negative balance of trade. The OECD shows negative 1.26 billion (US dolars) for the 17 for 2011. That’s peanuts. About the same as Israel, Portugal, or Poland. By contrast, for the U.S. it was 60.56 billion. The trade imbalances affecting the 17 are internal to the zone, mostly the result of Germany running a surplus with respect to the others.