Sir, Wolfgang Münchau berates European policy makers for their macroeconomic illiteracy (“The Wolfson prize for European political illiteracy, April 9). Yet by asserting that macroeconomists do not have a model for monetary unions he reveals his own macroeconomic illiteracy. In particular, he seems to be blissfully unaware of the vast economic literature on optimum currency areas as well as of that on the appropriate use of fiscal policy and monetary policy under different exchange rate regimes.

More disturbing yet is the highly legalistic approach that Mr Münchau brings to the issue of the possible exit of a member country from the euro. This is all the more surprising in view of the recent assurances from senior German policy makers that, were Greece to choose to leave the euro, Europe would not throw the legal book at it by insisting that Greece would also have to leave the European Union.

The legalistic approach that Mr Münchau takes on the issue blinds him to the possibility that an exiting country’s European partners could smooth that country’s departure from the euro in a number of important ways. They could contribute to the large international financial support package that would almost certainly be needed to build confidence in the newly introduced currency. They could also replicate the present trade preferences as well as the structural funds that an exiting member country presently receives within the EU.

European policy makers would do better to plan for the possibility that a number of countries might choose to leave the euro than heed Mr Münchau’s counsel of despair that little can be done to smooth the process of the euro’s unravelling.

Desmond Lachman is a resident fellow at the American Enterprise Institute.