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Updated Saturday, May 1, 2010 11:54 am TWN, By William Pesek, Bloomberg
Asia doesn't need to be so enthusiastic on single currency
Seoul --
Funny how Asia's biggest idea, a single currency, is suddenly a taboo topic.
Take Japanese Prime Minister Yukio Hatoyama, who came to office in August with big talk of an Asian euro. His push reinvigorated longstanding dreams of strong regional cooperation and Europe-like stability and peace.
Well, try finding a senior official in Tokyo making that case nowadays. Scandals have befallen Hatoyama's government, the latest involving the indictment of his party's No. 2 official, Ichiro Ozawa, over campaign-finance allegations.
The rest of the region is focused inward. Reining in the stimulus of the last two years is the issue of the day. So is keeping inflation from setting back living standards. Political challenges abound from Beijing to Bangkok.
Yet history will show the real culprit behind Asia abandoning its single-currency dream is Greece. If Asia does consider adopting its version of a euro in our lifetimes, here are four lessons it should learn from the chaos in Europe.
One: Be careful what you wish for. Asian policy makers have long had a romanticized view of Europe's efforts to join economies. One central bank, one set of banknotes, open borders, honest-to-goodness free trade, peace and prosperity as far as the eye can see. Until just a few months ago, it was possible to ponder the wonderfulness that could be if only Asia had a euro.
Asia's Prototype
That was until Greece, whose economy is smaller than Iran's, pulled the rug out from under Asia's prototype. A cut in Greece's credit rating by Standard & Poor's to junk this week quickly drove up borrowing costs in Italy, Portugal and Ireland.
Debt woes in Spain, whose economy is bigger than Canada's, also are unnerving markets.
Far from taking care of an economy's problems — such as chronic budget deficits, low tax collection, bloated pensions or rigid labor markets — monetary union may exacerbate them. Were it free to, Greece could devalue and deflate a bit of the negativity plaguing its outlook. Asia's challenges dwarf Europe's and this region needs maximum flexibility with which to react to any and all shocks.
Asia doesn't need to be so enthusiastic on single currency
Seoul --
Funny how Asia's biggest idea, a single currency, is suddenly a taboo topic.
Take Japanese Prime Minister Yukio Hatoyama, who came to office in August with big talk of an Asian euro. His push reinvigorated longstanding dreams of strong regional cooperation and Europe-like stability and peace.
Well, try finding a senior official in Tokyo making that case nowadays. Scandals have befallen Hatoyama's government, the latest involving the indictment of his party's No. 2 official, Ichiro Ozawa, over campaign-finance allegations.
The rest of the region is focused inward. Reining in the stimulus of the last two years is the issue of the day. So is keeping inflation from setting back living standards. Political challenges abound from Beijing to Bangkok.
Yet history will show the real culprit behind Asia abandoning its single-currency dream is Greece. If Asia does consider adopting its version of a euro in our lifetimes, here are four lessons it should learn from the chaos in Europe.
One: Be careful what you wish for. Asian policy makers have long had a romanticized view of Europe's efforts to join economies. One central bank, one set of banknotes, open borders, honest-to-goodness free trade, peace and prosperity as far as the eye can see. Until just a few months ago, it was possible to ponder the wonderfulness that could be if only Asia had a euro.
Asia's Prototype
That was until Greece, whose economy is smaller than Iran's, pulled the rug out from under Asia's prototype. A cut in Greece's credit rating by Standard & Poor's to junk this week quickly drove up borrowing costs in Italy, Portugal and Ireland.
Debt woes in Spain, whose economy is bigger than Canada's, also are unnerving markets.
Far from taking care of an economy's problems — such as chronic budget deficits, low tax collection, bloated pensions or rigid labor markets — monetary union may exacerbate them. Were it free to, Greece could devalue and deflate a bit of the negativity plaguing its outlook. Asia's challenges dwarf Europe's and this region needs maximum flexibility with which to react to any and all shocks.
