Saving Euro by Dividing Europe in Multiple OCAs

Dimitrios Dapontas ()
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Dimitrios Dapontas: University of Central Greece, Livadeia, Greece

Acta Universitatis Danubius. OEconomica, 2013, issue 9(2), 107-119

Abstract: On the aftermath of the global credit crunch was made clear that the Euro countries debt crisis shows that the EMU is far from being an Optimal Currency Area (OCA) under its current form. The countries accepted bailouts from their counterparts and international organizations in order to prevent the Eurozone collapse spreading the crisis further. Can the breakup to multiple areas help as Tootel (1990) suggested? 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. The scenarios are analyzed by using eleven equally weighted optimum area criteria to make Eurozone a single or a set of sustainable OCAs. These type and extension scenarios are presented for the first time for EU countries finding possible sets of independent country groups. 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

Keywords: Asymmetries; OCA; monetary policy; dissolution scenarios (search for similar items in EconPapers)
Date: 2013
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