Acta Universitatis Danubius. Œconomica, Vol 9, No 2 (2013)

Abstract

It is now generally accepted on the aftermath of the global credit crunch that the Euro countries debt crisis which has been spread in six countries (Greece, Ireland, Portugal, Italy Spain and Cyprus respectively) shows that the EMU is far from being an Optimal Currency Area (OCA) under its current form. The barriers have to do with limitations and restrictions on the single market, the lack of political union and different monetary policy targets. Incentives to secede are also present. But a possible withdraw of a country would have high cost for all the participants and it will lead to monetary union’s demolition. The costs related with a possible withdraw are high, thus it’s difficult for a country to leave a union. In the recent debt crisis the countries accepted bailouts from their counterparts and international organizations in order to prevent the Eurozone collapse spreading the crisis further.    

Three possible sets of OCA scenarios are analyzed along with the demolition scenario. The breakup of the Eurozone to two currencies consisting possible OCAs along with a second one adding all the EU members and a third one applying in small regions  are  analyzed by using eleven equally weighted optimum area criteria in order to make the Eurozone a single or a set of  sustainable OCAs. The results show that the asymmetries lead to the crisis persist in a possible two or more “euros”  area and this scenario cost is higher than union dissolution’s. Europe cannot become in its current form a set of OCAs under any circumstances.