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Greeks protesting: they have not surrendered their sovereignty

We keep hearing that Greece cannot impose exchange and capital controls – as Iceland did – to contain the damage from Drachma Day, restore stability, and prevent a devaluation overshoot.

We hear too that Greece would have to leave the EU if it is ejected from/withdraws from the euro.

Both assertions are wrong.

The European Commission published a study in its 2003 EU Economic Review examining the treaty basis for exchange controls in an emergency.

It concluded that states can indeed put up barriers under the Maastricht Treaty: “Among the actions that can be undertaken when a member state experiences serious balance of payments difficulties, Articles 119 and 120 EC provide for the possibility to reintroduce ‘quantitative protective measures’ against third countries.”