The Future of the Euro

We discuss the future of the euro in this section, especially in the light of its recent experience. It would seem on the surface that the future of a monetary union encompassing 17 politically independent countries each with their own currencies prior to the union would be much influenced by Optimal Currency Area (OCA) considerations. The formation of the single currency and the euro area provides one of the few occasions on which a change in the scope of a currency area has been actively considered. The other recent cases that come to mind would be the reunification of Germany, and the splintering of Czechoslovakia, the Soviet Union and Yugoslavia. In each of those cases, the political considerations for the currency regime would dominate any OCA-style considerations (we return to the question of the relationship between monetary union and political union in chapter 9). As argued in chapter 2, the OCA considerations had virtually no impact on the decision to introduce a single European currency nor on the conditions governing which countries were to be members. This background is very relevant to the contents of this chapter as suggested in chapter 2. These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.