An 11-year-old Dutch boy has gone where many of the best economic minds in Europe have feared to tread and proposed a radical solution to the European single currency's problems - using a pizza as his inspiration.
An 11-year-old Dutch boy has gone where many of the best economic minds in Europe have feared to tread and proposed a radical solution to the European single currency’s problems – using a pizza as his inspiration.
Jurre Hermans’ entry in the 250,000 pounds ($401,000) Wolfson Economics Prize, an international economics competition to find the “best contingency plan for a break-up of the euro” won special mention Tuesday from the judging panel.
Hermans, of Breedenbroek in the Netherlands, was 10 at the time he entered. He has been given a (EURO)100 ($133) gift voucher for his efforts but failed to make the final short list of five proposals – which included reversing the process in which the euro was created and exiting the system over a weekend.
The 17-country single currency union has been placed under considerable strain by the crippling debt problems of some of its members. Greece recently managed to avoid a chaotic default on its debt – an event that could have destabilized the 17-country eurozone and the global economy – by negotiating a (EURO)170 billion ($226 billion) bailout. If Greece had been forced into a disorderly default, one course of action would have been for it leave the euro and go back to its old currency, the drachma.
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Some Europe-watchers have warned that any country’s exit from the eurozone would destabilize the rest of Europe and plunge the region into a deep recession. On the other side, “euroskeptics” argue that the currency union’s problems are so great that an orderly break-up with countries going back to their old currencies, such as the Italian lira, is the best answer.
The prize has been sponsored by a family charity trust of Lord Simon Wolfson – a member of the Conservative Party in the U.K.’s second parliamentary chamber, the House of Lords – and is being run by the think tank Policy Exchange. The competition attracted 425 entries.
“Sadly, the risk of a country leaving the eurozone has not gone away,” Lord Wolfson said at the announcement of the shortlist. “The ideas contained in these entries are an invaluable contribution to tackling this important issue.”
In a telephone interview after school, Hermans said he came up with the idea after watching Dutch TV news.
He explained his idea in brief, saying Greeks would “hand in all their euros and get drachma in return. The euros go to the government and it pays the debts.”
“I saw it on television and said, `why don’t they do that?'”
In his written entry to the competition, translated into English by his father Julius, Jurre goes into greater detail, suggesting that on top of Greek people exchanging euros for drachma, anyone trying to move euros out of Greece should be penalized.
“All Greek people should bring their euro to the bank,” he wrote, including a diagram of his plan. “They put it in an exchange machine …. You see, the Greek guy does not look happy!!
“The Greek man gets back Greek drachme from the bank, their old currency. The bank gives all these euros to the Greek government.
“All these euros together form a pancake or a pizza. Now the Greek government can start to pay back all their debts, everyone who has a debt gets a slice of the pizza.”
Julius Herman said his son’s career ambitions lie outside the field of advanced economics. “He wants to do something with animals,” he said.
“He’s not particularly interested in politics or economics. He started thinking about it because it is getting so much attention in the media.”
The prize’s five shortlisted finalists, who will each receive 10,000 pounds to continue their work ahead of the prize’s award on July 5, and their proposals are:
- Robert Bootle and his team of Capital Economics in London: A country leaving the euro would convert its government and consumer debt into its own currency. The country would then deliberately default to bring its debt levels down to 60 percent of its economic output.
- Catherine Dobbs, a British private investor: The process which created the euro would basically be reversed. All claims in the exiting country would be replaced by claims in the new currency.
- Jens Nordvig and Nick Firoozy of Nomura Securities in London: If a country quits the euro, British law would not recognize debt contracts in the country’s new currency. A new way of handling and dealing in these debt contracts would have to be introduced.
- Neil Record of Record Currency Management: Record contends that if one country leaves the euro, the currency has to be dissolved. He thus argues for maintaining secrecy for as long as possible before announcing a breakup plan, to prevent markets from attacking structural weaknesses in other countries.
- Jonathan Tepper of North Carolina-based Variant Perception: Many currency unions have failed in the past and a euro break-up is not especially challenging. Using past examples as a guide, countries should exit by surprise over a weekend, declare an extra bank holiday or two around the date of the exit and stamp the existing currency until new notes are circulated.
Corder contributed from Amsterdam