How to Leave the Eurozone: The Case of Finland

Abstract

This article provides thoughts and guidelines on how a country could exit from the Economic and Monetary Union (EMU) and its currency the euro. We take the hypothetical exit of Finland as a concrete example. Although there is a way out of the euro for Finland and other member countries, exit would not be easy, nor would its short-term costs be known beforehand with any clear margin. We find the lack of a domestic payments system and uncertainty concerning the redenomination costs to be the biggest risks associated with the cost of Finland’s exit. Still, the costs of Finland’s exit need not be very large, around 10 billion euros in the best-case scenario, but we also acknowledge a very costly scenario for the exit. Any member country considering exit from the euro should weigh the short-term costs of an exit against the possible long-run benefits of having a domestic currency.

Keywords: Eurozone, Payment System, Domestic Currency, Exchange Rate

JEL Classification: E61, F45, H12