by Anders Aslund, Peterson Institute for International Economics
Op-ed in VoxEU.org August 21, 2012 © Peterson Institute for
International Economics Articles on a possible breakup of euro
area either see it as a mere devaluation (Lachman 2010, Roubini
2011) or reckon that its collapse would amount to a major
economic disaster (Buiter 2011, Cliffe et al 2010, Normand and
Sandilya 2011). It seems the latter is more likely. Large
imbalances have accumulated between southern debtor countries
and northern creditor countries. Any capping of these balances
would disrupt the payments mechanism between the euro area
countries and impede all economic activity (Åslund 2012). In the
last century, Europe saw the collapse of three multi-nation
currency zones, the Habsburg Empire, the Soviet Union, and
Yugoslavia. They all ended in major disasters with
hyperinflation. In the Habsburg Empire, Austria and Hungary
faced hyperinflation. Yugoslavia experienced hyperinflation
twice. In the former Soviet Union, 10 out of 15 republ