Even if Greece wanted to leave the Eurozone, it’s far from clear how they could do so legally.
Charles Proctor, a partner at UK-based law firm Bird & Bird, who worked on a number of the early bond deals denominated in euros, says a unilateral withdrawal from the currency, without the consent of other member states, would be a clear breach of the Maastricht Treaty.
“Article 50 of the Lisbon Treaty [signed in 2007] allows a member state to withdraw from the European Union as a whole,” says Proctor. “But it does not contemplate a withdrawal from the single currency alone. It is not possible to infer a right to withdraw from the euro, since the Maastricht Treaty [signed in 1992] stated that the currency substitution would be ‘irrevocable’.”
Worse yet, even if Greece withdrew by breaking this one treaty, it’s not like the nation would suddenly be free from its problematic euro-denominated debts:
If Greece withdrew from the Eurozone, it would have to create a new local currency and pass a new law providing for the conversion of former euro debts into the new unit, adds Proctor. “That conversion would have to be recognised by courts in Greece, but courts in London and New York would continue to enforce international bonds and enforce payment in euro, because the new Greek monetary law could not alter or detract from euro-denominated obligations governed by English or New York law.”
One would imagine that a Greece exit from the euro could easily result in the euro strengthening against whatever new Greek currency was created. This would make euro-denominated debt burdens even more onerous to the Greek public and private institutions, since as shown above they would still need to be honored.
Moreover, it’s not just Greece that could have difficulty leaving the euro from a legal perspective. The above issues would also apply to Spain, Italy, Portugal, etc.., even perhaps Germany if the country tried to do it unilaterally.
Deep down we feel ejecting Greece is theoretically the best long-term solution, but this might be impossible from a practical perspective.