Nick Young & Richard Holden picture a post-euro debt landscape
The previously unthinkable is being thought with greater frequency: will the euro survive? On Friday 13 January, Europe was plunged into a fresh euro crisis when France was stripped of its coveted AAA credit rating by Standard & Poor’s in a mass downgrade of nine eurozone countries. Speculation is rife that Greece is set to default on its debts due in six weeks, leading to Greece breaking away from the euro and a resurrection for the drachma.
If the euro does not survive, what would happen to debts owed in euros?
The precise answer for any given debt will depend on a myriad of variables. These include the steps taken at national and international level to regulate the position, especially those that provide new currency to replace the euro. Other factors include the exact terms of the relevant contract, especially as to price, payment, and governing law.
Amid such uncertainty, a starting point for an answer is to resort to first principles applicable to a simple contract, such
