On optimality or non-optimality of the eurozone

Economic and Monetary Union is an unprecedented event in the monetary history of Europe. The eurozone since its creation 13 years ago expanded to 17 Member States and functioned relatively smoothly up to the outset of the global financial crisis. Only the severity of the subsequent eurozone crisis showed the actual scale of structural, institutional and governance problems it had. The differences between its core and peripheral regions became more than evident. In the present paper we discuss the optimality of the existing and the enlarged eurozone. Despite of the progress made, eurozone is far away from meeting the OCA criteria. Further enlargements, by increasing the overall internal diversity of the union, are likely to increase the gap. It seems however that even non-optimal monetary unions may function but at a significantly higher costs. In some cases the long term costs could even outweigh the benefits. The nominal convergence criteria are only partially consistent with the OCA theory, they are largely arbitrary and should be modified in the interest of the present eurozone as well as of acceding states.