Is Le Pen’s ECU plan feasible?

Marine Le Pen’s suggestion last week that France could leave the euro-zone, devalue and then peg the new currency to the euro to limit exchange rate volatility has been written off as a hopeless attempt to have her cake and eat it. We agree that it is highly unlikely that she could do this while maintaining full access to the EU Single Market. And this policy, combined with her others, could well make the problems in France’s domestic economy worse still. However, a devaluation is an attractive option, especially if public debt could be redenominated as she suggests. She might therefore win over some French voters. And the idea will be even more appealing to voters elsewhere, particularly in Italy, where public debt is higher, exports are less competitive and exchange rate stability is also highly prized.