EURO CRISIS: THE FAILURE OF OPTIMUM CURRENCY AREAS
Author: PROF. DHIRENDRA KUMAR, DR. R. GANESAN, MS. GAURI PATHAK
Category: Human Resource Management
Abstract:
The damage caused by the financial crisis of 2007 lasted long mainly in three forms: high and rising public debts, fragile banks and a huge liquidity overhang that need to be eventually withdrawn. The crisis which
strikes at the heart of worlds' largest trading block(Europe), contain only two of the three fateful elementsproblematic
sovereign debt in Greece and other vulnerable countries and fragile European banks, which hold a large
part of that debt. The case not only illustrates the initiatives taken by European countries to form a currency Union
with fixed exchange rates among themselves and flexible exchange rates for others but also questioned the
optimum currency theories given by Mundell and others. It totally questioned the viability of the concept of optimum
currency areas and the formation of European Union.
