Memorandum on monetary unions: The neglected empirical evidence threatening the European Monetary Union

Abstract

Monetary unions are very particular currency regimes, which aim at lowering transaction costs and annulling infra-union exchange risks. Despite its benefits, this exchange rate arrangement is subject to a plethora of faults and weak points mainly due to its intrinsic ‘one-size-fits-all approach’. In the past and perhaps in the future too, precisely this core aspect has caused breakups of previous historical experiences (cf. the Latin, Scandinavian or Austro-German currency union). Now, the European Monetary Union (EMU) between 17 heterogeneous country members is threatened by the same matters of concern. In the light of the ongoing debt crisis, theoretical as well as empirical evidence proves that at least nine (forgotten or even whitewashed) critical assertions apply to the Euro Area and its durability. As we will endeavor to prove, the Eurozone is seriously endangered by its missing attention to heterogeneity, divergences and plurality of actors as well as economic needs.