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The mechanics of currency breakups are complicated but feasible, and historical examples provide a roadmap for exit. The real problem in Europe is that EU peripheral countries face severe, unsustainable imbalances in real effective exchange rates and very high external debt levels. Orderly defaults and debt rescheduling coupled with devaluations are inevitable and even desirable.
European politicians do not want to contemplate the end to an ambitious economic project like the euro. However, Greece and Portugal, and perhaps Spain, Ireland and Italy will ultimately conclude that it is in their best interest to exit the euro. When they do so, they will be able to draw on historical examples to guide them.
While the euro is historically unique, the problems presented by a currency exit are not. There is no need for theorizing about how the euro breakup would happen. Previous historical examples provide crucial answers.
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