Martin Coiteux
Associate Professor,
Department of International Business,
HEC Montréal
European Lessons for Quebec.
Europeans were not lacking in audacity when they decided to do away with their respective national currencies and to replace them with a common one. This audacity allowed them, in turn, to reap important benefits. The Euro rapidly established itself as one of the currency-pillars of the international financial system. At the same time, the single currency enabled Member States of the monetary union to engage in an unprecedented process of convergence with respect to their inflation and interest rates. This convergence made it possible for what were traditionally poorer countries to close the gap that separated them from richer ones. Yet despite these undeniable successes, the Eurozone is currently being shaken by a crisis that is testing the will of Europeans to reinvent the institutions that bind them.
Economists who have analyzed monetary unions tend to emphasize two important criteria of viability: 1) economic convergence of the participant regions and 2) the existence of an institutional mechanism to transfer wealth between these same regions. As important as the first may be, it cannot in and of itself constitute an absolute criterion in determining the viability of a monetary union. Participant regions will always be distinct from one another, if only because of their relative specialization in different spheres of economic activity. Given this, it would be illusory to think that their respective economies will always progress in tandem. This is why economists insist more on the importance of transfers between regions in order to judge the strength of a monetary union. From this perspective, there is much to learn from a comparison between the European and Canadian experiences.
