Special Report: GCC – Euro crisis has lessons for planned GCC currency union

06 July 2010

The crisis that has played out across the eurozone in recent months offers a timely lesson for the GCC member states and their proposed single currency

The bailout of Greece, which failed to adhere to the European Central Bank’s guidelines concerning government debt levels, shows what can potentially go wrong in a monetary union.

Plans for a unified GCC currency have been discussed for nearly 30 years and the deadline has been pushed back repeatedly and is now tentatively set for 2015. But in the wake of the euro problems, some experts are now questioning the need for it.

Already the project has lost much of its momentum. Disputes over the location for the GCC central bank last year led the UAE to pull out of the single currency, and Oman has previously said it does not intend to join immediately.

With the political will to push ahead with the currency union waning, the six member states now have a genuine reason for pausing to consider the advantages and disadvantages of economic integration.

The euro has been hugely devalued by the bailout of Greece and the threat of further debt problems in Spain and Portugal. The six Gulf states might do well to ponder what impact Dubai’s debt crisis might have had on a single GCC currency before deciding whether to move ahead with the project.

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