Question

What would make a country decide to change from a common currency, like the euro, back to its own currency?

Answer 1

1. Loss of autonomy over monetary policy: A country with common currency like Euro will have to follow the monetary policy set by ECB which makes its monetary policy considering the entire Eurozone, thereby a country which may have domestic and economic issues different from eurozone will have to settle for "Ineffective blanket wide" monetary policy because they cannot tailor made monetary policy on their own.

2. High unemployment and lack of growth in areas which lacks in economic development. As a country will have to settle for same policy and currency, huge capital will move to advanced economies in that region and the less advanced economies will not have much power to offer incentives to business to invest in their countries.

3. Easier access to debt may lead a nation to borrow more than their capacity thereby leading to fall in debt trap. Example Italy and Greece in Eurozone.

Above are some reasons why a nation may be willing to leave common currency to back its own currency.

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