Leaving eurozone is not so straightforward
The markets turmoil and sovereign debt crisis have encouraged speculation about a possible breakup of the eurozone or the departure of one or more of its members. But there is no simple institutional mechanism to facilitate such an outcome.
Changing eurozone membership and conditions would raise complex institutional and political issues, though it would be relatively easy for a single country to pull out provided this was agreed by other eurozone members, according to analysts watching European Union developments.
Put simply, there is no “release clause” in the European and Lisbon treaties which enshrine conditions for eurozone membership, allowing a country to leave the group. But faced with a crisis European leaders could by-pass existing treaties and negotiate a country’s exit under international law and the Vienna Convention.
“If a country decides to leave [the eurozone] it’s just a process. You would not need a change of treaty. If a country wants to leave it would just happen under international law,” says Piotr Maciej Kaczynski, research fellow at the Brussels-based Centre for European Policy Studies (CEPS). The same would apply if a country was to be thrown out.
While this could serve in an emergency, a broader restructuring of the euro group would require treaty changes and this is a much more complex endeavour. It would require holding an intergovernmental conference (IGC) to rewrite the parts of the treaty dealing with monetary union, a procedure that could take months.
The treaty articles which refer to the “irrevocable” fixing of exchange rates and of the value of the euro for economic and monetary union (EMU) say that any later revision reversing that situation is precluded. However, Article 50 of the treaty provides for withdrawal from the EU, which would be a possible, if extreme solution for a member state, said a senior EU legal official who did not want to be named.
Under the Lisbon Treaty, which came into force in 2009, proposals for treaty amendments can be submitted by a member state government, the European Commission and the European parliament. These proposals may either increase or reduce the competences conferred under the EU treaties. The proposals are then submitted to the European Council which comprises heads of state or government, and which must consult with the European parliament and the Commission. If institutional changes in the monetary area are proposed, the European Central Bank must also be consulted.
Amendments normally only come into force when they have been ratified by all the member states. To avoid The Lisbon treaty introduced a clause that if, two years after the signature of a new treaty, four-fifths of members have ratified it and one or more have not, the issue “shall be referred to the European Council”. But this is clearly time consuming.
The European Council has no formal legislative power, but under the Lisbon Treaty it is responsible for defining the EU’s “general political directions and priorities.” In effect it is the EU’s strategic and crisis solving body.
The Council then tries to negotiate a solution if not all member states have succeeded in ratifying the new treaty. “There is no mechanism in the treaty whereby a country can leave the eurozone, but doubtless some mechanism could be thought up,” said the official. Also it is very unlikely that any individual eurozone member state would do anything without the agreement of the others.
The procedure would be similar to one for leaving the EU. First a country would express its willingness to leave then there would be a decision by the Council.
In a hypothetical situation a country could be facing a major financial crisis with no option but to abandon the single currency to find an alternative that would devalue its debt. In such a radical situation, it could ask to leave the eurozone and that would be granted. Though there might be weeks or months of negotiations. “Finally there would be an extraordinary meeting of the European Council to send a political message that this is all for the good. That’s the political process,” said the EU official.