What the eurozone lacks - as foreseen in 1961

A classic paper on the economics of currency areas illuminates the dilemma facing the eurozone. The recent calm in financial markets does not alter the fundamental problem, warns David Rowe


The immediate intensity of the euro area's financial crisis has eased in the past year, but as The Economist recently noted, ‘europhoria' is distinctly premature.1 Fundamental economic hardships remain, including unemployment that is above 25% in Greece and Spain, and above 10% in Italy and France.

Colin Lawrence, formerly of the UK's prudential regulator and now with consulting firm EY, recently reminded me of Robert Mundell's seminal 1961 paper, A theory of optimal currency areas.2 In a

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