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From EMU to AMU? The Case for Regional Currencies

By Zanny Minton Beddoes
July/August 1999
Article Summary and Author Biography

The euro is just the beginning. Within a few decades, single-currency zones will dominate international finance -- although East Asia may be the odd zone out.

Zanny Minton Beddoes is the Washington economics correspondent for The Economist.

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Letter to the Editor
FLOATING ALONG
Henry N. Goldstein

When tomorrow's historians look back at the recent financial crises and subsequent efforts to reform global finance, they will reach two conclusions. First, the grand rhetoric of creating a new global architecture yielded few concrete results. Second, we failed to foresee the most profound consequence of the turmoil: regional currency unions. By 2030 the world will have two major currency zones -- one European, the other American. The euro will be used from Brest to Bucharest, and the dollar from Alaska to Argentina -- perhaps even in Asia. These regional currencies will form the bedrock of the next century's financial stability.

That claim may seem bold, even outlandish. The concept of regionalism, whether financial, military, or commercial, hardly enjoys an auspicious reputation. Free-trade enthusiasts fret that regional trade arrangements divert more trade than they create. Europe's single market was long portrayed as "Fortress Europe" by outsiders. European aspirations for an independent defense initiative raise some eyebrows in Washington. Japan's proposal to create an Asian monetary fund in 1997 was quickly squashed by the Americans. In each case, opponents fear that regional approaches are exclusionary, protectionist, or destabilizing. But in finance, that prejudice is misplaced. Regional currencies will prove the best route to reconciling the economic imperatives of increasing international capital mobility with the political realities of the nation-state...

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