Find a way for an orderly exit from the European Monetary Union and you may be in for a cash prize of £250,000 (€286,000), the second-biggest of its kind just after the Nobel Prize for Economics.
The challenge that top academic economists around the world are set is to find a solution to manage the systematic exit of one or more states from the euro. The Wolfson Economics Prize, which is a one-off competition, will be sponsored by the Charles Wolfson Charitable Trust, a family charity. Its process will be managed by Policy Exchange , a think tank based in Westminster, London.
Lord Wolfson told euronews that this is a “generational question”: “It’s essential that the world begins to think about it. At the moment we have this very odd situation that everyone recognises that the break-up of the euro is a possibility, but no one is discussing what is the best way of managing that process,” he said.
“It is a process that if managed well and carefully, could have very few short term damages for the eurozone economy. If it’s managed badly, it could not only be disastrous for the eurozone, it could be disastrous for the whole world’s banking system.”
Submissions will be accepted until 31 January 2012, after which they will be judged by a panel of academic economists. Some of the major questions that need to be answered are whether and how to redenominate sovereign debt, private savings, and domestic mortgages in the departing nations, the effects on the stability of the banking system, and the link between exit from EMU and sovereign debt restructuring.
Lord Wolfson, who is Chief Executive of Next and a major donor to the Conservative Party, commented that he doesn’t think “we’ll have a breakup in the short term,” as “there is enough firepower in the wealthy countries in the eurozone to keep it together.”
“The stakes are enormous,” he said. “The future of the world economy will, in large part, be governed by what happens over the next few years in Europe. I, along with most European businessmen, hope that the eurozone will stabilise, but in the event it does not Europe must not sleepwalk into a policy vacuum.”
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