WASHINGTON
D.C., United States, Friday March 8, 2013 – A senior economist with the
International Monetary Fund (IMF) is warning member countries of the Eastern
Caribbean Currency Union (ECCU) that they face similar challenges now
confronting the Eurozone countries.
 |
| ALFRED SCHIPKE |
Alfred
Schipke, formerly of the IMF Western Hemisphere Division, said the Eastern
Caribbean Currency and Economic Union, maybe the smallest of three economic and
currency unions worldwide, bringing together eight small islands, whose total
combined population is less than a million.
But
he said it is an interesting microcosm of the Euro area and the challenges it
faces following the global economic crisis of 2008.
Schipke
has edited a new book on the Eastern Caribbean Currency and Economic Union and
in an interview posted on the IMF website, said the member countries of the
union – Antigua and Barbuda, Dominica, Grenada, St. Lucia, St. Vincent and the
Grenadines, St. Kitts-Nevis, Montserrat and Anguilla – all have many
similarities including the same colonial history.
“In
terms of the benefits given the small size of these countries it allows these
countries to take advantage of sustained economies. It also allows them to what
we call diversify risk, one country gets hit by shock or hurricane then they
can pool resources and deal with those shocks more effectively.
“But
most importantly because of the size of the islands they can provide at the
regional level, more cost effective public services (and) that’s the major
benefit.”
He
said what does matter is that if those countries speak with one voice they can
have better representation at the global level.
“Interestingly
enough the Eastern Caribbean Currency and economic Union is actually a
microcosm of the European Economic and Monetary Union since it has been faced
by rising fiscal deficit, unsustainable debt levels in a number of states, a lack of fiscal
integration and challenges in the financial sector that are threatening the
underpinnings of the union.
“Just
like in the European Currency Union overcoming these challenges are
particularly difficult in monetary unions,” he said, adding “sometimes you need
a crisis to implement reforms.
“So
there are opportunities and I think there is a general feeling in the region
that further integration is needed to ensure the viability of the union, but in
the European Union you would need to put political capital into the reforms.
Asked
what would be some policy recommendations for long term growth in the region,
Schipke said there is need for generating conditions for strong sustainable
growth which he noted is paramount in the Eastern Caribbean.
“As
a matter of fact, the Eastern Caribbean experience strong growth periods in the
years after independence, but since the 1990’s prior to the financial crisis,
growth slowed down significantly.
“Now
that is in part explained by a number of shocks, the erosion of trade
preferences that the countries benefitted from Europe, in terms of the trade
shocks, higher oil prices and also a reduction in foreign aid.”
He
said another issue is that tourism has been a major contributor to economic
growth in the region and while “there is some potential for future growth in
this particular area in other service areas”, the new growth model for the
region will have to rely more on the private sector.
“In
the past the role of the public sector was very dominant, but given the very
high debt levels, the room for public participation will be more limited, so it
has to be more private sector driven.”
Schipke
said unlike within the European Union, there is no opposition to a single
currency within the Eastern Caribbean union.
“The
common currency has never been questioned given the small size of these
countries there is no alternative to that. In addition to that, the Eastern
Caribbean had never had its own currency. It was either the British pound, it
has had a currency board and it has served the region very well. It has
relatively low rates of inflation and it is one of those currency broad arrangements
that has success because it has lasted for a very very long time.
“Given
that there is no questioning of the common currency that needs to be
supplemented with other elements including a sound framework for the financial
sector at the regional level ... I don’t think there is any questioning that
further coordination needs to take place.
“
I think the question is more at what speed rather than whether?,” he added.
(CMC)
Source:
http://www.caribbean360.com/index.php/business/672048.html
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