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The probability of a partial or complete break-up of the euro has risen over the last years. Such an event could create a balance sheet problem for economic agents, since the redenomination process could introduce significant currency mismatches between the asset and liability sides. We propose a new assessment of this redenomination risk, by country and by main institutional sector, for two scenarios: a single country exit and a complete break-up. Our main conclusion is that, even though the problem has to be taken seriously, its order of magnitude should not be exaggerated. Only a few sectors are at significant risk: public debts of Greece and Portugal, financial sectors of Greece, Ireland and Luxembourg. In particular, the consequences for the non- financial private sector should be manageable. We provide policy recommendations aiming at limiting the risk ex ante, and mitigating the consequences ex post.

Balance sheets after the EMU: an assessment of the redenomination risk