The adoption of a common currency is not irreversible. In this paper, we develop a model of a small open economy which is initially part of a currency union. We show that, first, if fiscal policy fails to stabilize public debt, expectations of regime change arise necessarily in equilibrium. A regime change implies an alternative scale policy or, through exit from the union, monetary autonomy. Second, if monetary policy is expected to revalue debt after exit, interest rates rise prior to exit, reflecting redenomination risk. We explore the quantitative implications of redenomination risk by calibrating the model to Greek data.