Saving Euro by dividing Europe in multiple OCA’s

• Main Author: Dimitrios K. Dapontas
• Format: Article
• Language: English
• Published: Danubius University 2013-04-01
• Series: Acta Universitatis Danubius: Oeconomica
• Subjects: Asymmetries; OCA; monetary policy; dissolution scenarios
• Online Access: http://journals.univ-danubius.ro/index.php/oeconomica/article/view/1682/1551

On the aftermath of the global credit crunch was made clear thatthe Euro countries debtcrisis 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 toprevent the Eurozone collapse spreading the crisis further. Can the breakup to multiple areas help asTootel(1990) suggested?Three possible sets of OCA scenarios are analyzed along with thedemolition scenario. The breakup of the Eurozone to two currencies consisting possible OCAs alongwith a second one adding all the EU members and a third one applying in small regions. Thescenarios are analyzed by using eleven equally weighted optimum area criteria to make Eurozone asingle or a set of sustainable OCAs. These type and extension scenarios are presented for the firsttime for EU countries finding possible sets of independent country groups. The results show that theasymmetries lead to the crisis persist in a possible two or more “euros” area and this scenario cost ishigher than uniondissolution’s. Europe cannot become in its current form a set of OCAs under anycircumstances.