Greece cannot legally be forced out of the Euro in case of a default.
Greece is likely to keep the Euro as currency even after bankruptcy.
Forcing Greece out of the Eurozone is discriminatory, since other states use the Euro without being members of the Eurozone.
Even if voices in Brussels, Berlin, Frankfurt, London or in Washington, D.C. and New York City claim the only response for Greek bankruptcy was the Grexit, they ignore the legal basis for the EU and the Euro-zone.
The Treaty on the European Union and the Treaty on the Functioning of the European Union with their protocols govern the mechanisms of EU and Euro-zone. And while leaving the EU is now clearly regulated in Article 50 of the EU-Treaty, all other provisions aim at further integration. This means it is already doubtful whether a right to leave only the Euro-zone exists at all, unless a Euro-zone member declares to leave the EU.
The treaties oblige all Member States to introduce the Euro, except the ones who explicitly opted out at the time of negotiations. As Article 140 of the Treaty on the Functioning of the EU stipulates, the Euro will replace the domestic currency as soon as the convergence criteria are met. At this point the consent of the Member State is not necessary any longer. The relevant treaties regulate access to and membership in the Euro-zone in detail but there is no provision in any treaty or protocol that provided for an expulsion mechanism in case a member declared bankruptcy. Even the European Central Bank confirms in its 2009 paper “Withdrawal and Expulsion from the EU and EMU: Some Reflections” that “a Member State’s expulsion from the EU or EMU, would be legally next to impossible“.
But if there is no legal duty to leave the Euro-zone and no EU-institution has the legal ability to force Greece out of the Euro-zone, what are the various institutions and government officials talking about?
If Greece ended up bankrupted, the Greek government would be unable to pay its domestic expenses such as the salaries of public servants and could not satisfy creditors any longer, either. In this situation, the argument of Troika and several governments goes, the logical and only option for Greece was to resort to its former currency as it could print as much of it as necessary. The German Government and other vocal proponents of institutions involved ranging from EU over economic think tanks to finance claim the Drachma increased competitiveness by devaluation which led to economic growth and thus the ability to pay back credits. Others warn the Drachma would be an obstacle in trading with the Euro-zone, make imports much more expensive and make it impossible to ever repay any of the debt in Euro with the devalued Drachma.
Contrary to this scenario, a much more rational response was if Greece kept the Euro as legal tender also after bankruptcy since it would be obliged to re-introduce it again, anyway. Montenegro, Kosovo, Vatican City, Monaco, San Marino and Andorra are proof for an established practice of non-EU states using the Euro. These are not isolated cases limited to the Euro, using foreign currency as domestic legal tender is a common phenomenon. Currently the US Dollar is used as official currency in East Timor, Ecuador, El Salvador, several microstates and Zimbabwe and US Dollar banknotes are used in Panama.
If Greece cannot legally be forced out of the Euro-zone, it is only logical that a bankrupted Greece cannot be put into a worse position than any of those non-EU states that use the Euro without having ever been members of the Euro-zone or possibly never having met the convergence criteria. Instead, the Euro-group and Greece could agree on a suspension of voting rights in Euro-related fora and a ban on the right to mint coins and print paper money until Greece meets the convergence criteria again. This is probably the only way how the treaties are not going to be violated, enormous expenses for the re-introduction of the Drachma are going to be saved, Greece maintains unrestricted access to the markets of the EU and keeps the chance to pay back some of its debt. The only parties losing in this constellation are those who already bet on Greece losing the Euro and on the unavoidable devaluation of the Neo-Drachma. In return, the EU under the Junckers-administration would act in the spirit of Articles 2 and 3 of the EU-Treaty, according to which the EU’s aim is to promote peace, its values and the well-being of its peoples. Based on the rule of law, it shall work against discrimination, achieve economic growth, price stability, full employment, and social progress. And as Article 119 of the Treaty on the Functioning of the EU specifies, for the purposes set out in Article 3 of the EU-Treaty, the activities of the Member States and the Union shall include the adoption of an economic policy, including a single currency. Keeping Greece in the Euro-zone is as close as the EU can get to fulfil its own goals as defined in its own treaties. Not discriminating against Greece vis-a-vis those states using the Euro without being members of the Euro-zone would be an important first step.