Changing Currency Under a Monetary Union: Some Remarks

Abstract

This paper analyses the problems related to the change of currency in the case of the withdrawal of a Euro country from the single currency. Following withdrawal, the withdrawing state recovers the sovereign power over its own currency and is entitled to depreciate or revaluate it. The rules of conversion between the new and the old currency are given by the lex monetae. However, when the two currencies co-exist it is dubious what lex monetae applies to the obligations incurred before the withdrawal. This problem may be resolved by having recourse to the criterion of the proper law of contract. Nevertheless, when the proper law is not that of the withdrawing country the rules of conversion may still come into play in the form of overriding mandatory rules of the withdrawing country.