Optimum Currency Area
Optimum Currency Area
The economic theory explains that currencies should
operate in an area that is sufficiently homogeneous to provide a stable basis
for that currency. Otherwise, there will be pressures for sub-areas to break
away or requirements for major transfers of money from a central authority to
sub-areas in order to iron out regional differences.
Long-established stable states with the same economic development are generally
regarded as ideal currency areas because they tend to be homogenous and possess
all the tools for economic policy-making.
The Eurozone is not yet an optimum currency area, and the EU had only the competence to organise monetary policy – i.e. not all the tools.
The Lisbon Treaty and the Euro Pact have offered the EU new possibilities to govern other kinds of economic policy.
Links
See also Economic and Monetary Union and Single currency.
