One solution for a troubled country is to leave the EMU and return to a sovereign currency issued by the government – i.e., the Drachma for Greece, the Lira for Italy, and so on. The transition would be disruptive, with near-term costs. But the benefit would be to create domestic fiscal and policy space to deal with the crisis. Default on Euro-denominated debt might be necessary. Retaliation by the EU is possible.
solution for PIIGS
