Jurre Hermans, an 11-year-old boy from the Netherlands, has astounded economists by offering a simple solution to the problem of Greek solvency in the European Union.
His idea was submitted as an entry for the prestigious Wolfson Economics Prize, which attracts submissions from the world's most brilliant economists. To recognize the efforts of their youngest applicant, judges rewarded Hermans with a special mention and a gift voucher for €100.
The Wolfson Prize this year asked applicants to articulate their best solution to a very thorny problem:
If member states leave the Economic and Monetary Union, what is the best way for the economic process to be managed to provide the soundest foundation for the future growth and prosperity of the current membership?
Hermans, who was 10 at the time, responded that the Greeks should be forced to exchange euros for their old drachmas. They can process this transaction at a bank, a scenario that Hermans took the liberty to illustrate.
The Bank gives all those euro's to the Greek Government (see topleft on my picture), Hermans said in his submission. All these euros together form a pancake or a pizza (see on top in the picture). Now the Greek government can start to pay back all their debts, everyone who has a debt gets a slice of the pizza. You see that all these euro's in the pizza's go the companies and banks who have given loans in Greece (see right in my picture)
Hermans went on to explain the clever part of his idea: penalties to prevent Greeks from hiding their euros. The Greek people do not want to exchange their Euro's for Drachmes because they know that this Drachme will lose its value dramatically, he explained.
Hermans's shaky prose can be forgiven; the native Dutch speaker needed help from his father in order to explain his idea in English.
The other 451 applicants offered their own solutions to the European problem. The five who were shortlisted include famed British economist Roger Bootle, American entrepreneur Jonathan Tepper, and British investor Catherine Dobbs.
All entries were submitted by the end of January. The five finalists were announced on Tuesday; their submissions can be viewed on the contest website. Now, those five will have the opportunity to respond to questions from the judges and rework their entries for a final submission by the end of May. The winner will be announced on July 5.
All of the shortlisted entrants are slated to receive £10,000, and the winner will take home £250,000.
Of course, it's about more than cash prizes. Instructions on the contest website explain that the winning idea could have a real impact on the European economy.
There is now a real possibility that political or economic pressure may force one or more states to leave the Euro, say the guidelines. If the process is managed badly it would threaten European savings, employment and the stability of the international banking system. The Wolfson Economics Prize aims to ensure that high quality economic thought is given to how the Euro might be restructured into more stable currencies.
It's a timely issue, as the euro zone today is far from stable.
In mid-March, Greece negotiated a debt restructuring deal with other euro zone nations, allowing the country to begin collecting its second massive bailout. What burden is lifted off Greece's economy will be spread among other parties; European governments will offer assistance via low-interest loans, while private sector lenders have agreed to write off more than half of Greece's debts to them.
Ireland and Portugal have also received bailouts and continue to implement economic reforms in hopes to achieve an eventual recovery. Spain and Italy are on the brink; they have received assistance but are working to avoid an official bailout.
And all across the euro zone, unemployment is higher than it's been at any time during the past 15 years.
The five finalists for this year's Wolfson Economic Prize offer creative ways to deal with this ongoing problem. Jurre Hermans's ideas would likely not be popular with Greek citizens, who are already protesting severe austerity measures and would likely oppose giving other European countries a slice of their pizza.