The Nobel Prize winner Robert Mundell famously said in 1961 that national and currency borders need not significantly overlap, providing there was sufficient mobility. Akos Stiller / Bloomberg News
The Nobel Prize winner Robert Mundell famously said in 1961 that national and currency borders need not significantly overlap, providing there was sufficient mobility. Akos Stiller / Bloomberg News

No good blaming US for woes of euro zone



With youth unemployment touching 50 per cent in euro-zone countries such as Spain and Greece, is a generation being sacrificed for the sake of a single currency that encompasses too diverse a group of countries to be sustainable? If so, does enlarging the euro's membership really serve Europe's apparent goal of maximising economic integration without necessarily achieving full political union?

The good news is that economic research does have a few things to say about whether Europe should have a single currency.

The bad news is that it has become clear that, at least for large countries, currency areas will be highly unstable unless they follow national borders. At a minimum, currency unions require a confederation with far more centralised power over taxation and other policies than European leaders envision for the euro zone.

What of the Nobel Prize winner Robert Mundell's famous 1961 conjecture that national and currency borders need not significantly overlap? In his provocative American Economic Review paper A Theory of Optimum Currency Areas,he argued that as long as workers could move within a currency region to where the jobs were, the region could afford to forgo the equilibrating mechanism of exchange-rate adjustment.

He credited another (future) Nobel Prize winner, James Meade, with having recognised the importance of labour mobility in earlier work, but criticised him as interpreting the idea too stringently, especially in the context of Europe's nascent integration. Mr Mundell did not emphasise financial crises, but presumably labour mobility is more important today than ever.

Not surprisingly, workers are leaving the euro zone's crisis countries, but not necessarily for its stronger northern region. Instead, Portuguese workers are fleeing to booming former colonies such as Brazil and Macau. Irish workers are leaving in droves to Canada, Australia, and the United States. Spanish workers are streaming into Romania, which until recently had been a major source of agricultural labour for Spain.

Still, if intra-euro-zone mobility were anything like Mr Mundell's ideal, today we would not be seeing 25 per cent unemployment in Spain while Germany's unemployment rate is below 7 per cent.

Later writers came to recognise that there are other essential criteria for a successful currency union, which are difficult to achieve without deep political integration. Peter Kenen argued in the late 1960s that without exchange-rate movements as a shock absorber, a currency union requires fiscal transfers as a way to share risk.

For a normal country, the national income-tax system constitutes a huge automatic stabiliser across regions. In the US, when oil prices go up, incomes in Texas and Montana rise, which means that these states then contribute more tax revenue to the federal budget, thereby helping out the rest of the country.

Europe, of course, has no significant centralised tax authority, so this key automatic stabiliser is essentially absent.

Some European academics tried to argue that there was no need for US-like fiscal transfers, because any desired degree of risk sharing could, in theory, be achieved through financial markets. This claim was hugely misguided. Financial markets can be fragile, and they provide little capacity for sharing risk related to labour income, which constitutes the largest part of income in any advanced economy.

Mr Kenen was mainly concerned with short-term transfers to smooth out cyclical bumpiness.

But, in a currency union with huge differences in income and development levels, the short term can stretch out for a very long time. Many Germans rightly feel that any system of fiscal transfers will morph into a permanent feeding tube, much the way that northern Italy has been propping up southern Italy for the past century.

Indeed, more than 20 years on, western Germans still see no end in sight for the bills from German unification.

Later, Maurice Obstfeld pointed out that in addition to fiscal transfers, a currency union needs clearly defined rules for the lender of last resort. Otherwise, bank runs and debt panics will be rampant.

He had in mind a bailout mechanism for banks, but it is now clear that one also needs a lender of last resort and a bankruptcy mechanism for states and municipalities.

A logical corollary of the criteria set forth Mr Kenen and Mr Obstfeld, and even of Mr Mundell's labour-mobility criterion, is that currency unions cannot survive without political legitimacy, most likely involving region-wide popular elections.

Europe's leaders cannot carry out large transfers across countries indefinitely without a coherent European political framework.

European policymakers today often complain that were it not for the US financial crisis, the euro zone would be doing just fine. Perhaps they are right. But any financial system must be able to withstand shocks, including big ones.

Europe may never be an "optimum" currency area by any standard. But, without further profound political and economic integration - which may not end up including all current euro-zone members - the euro may not make it even to the end of this decade.

Kenneth Rogoff is a professor of economics and public policy at Harvard University, and was a chief economist at the IMF

* Project Syndicate

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Install an air filter in your home.

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Shower or bath after being outside.

Wear a face mask.

Stay indoors when conditions are particularly poor.

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Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
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Total funding: Self funded
Number of employees: 4
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Attacks on Egypt’s long rooted Copts

Egypt’s Copts belong to one of the world’s oldest Christian communities, with Mark the Evangelist credited with founding their church around 300 AD. Orthodox Christians account for the overwhelming majority of Christians in Egypt, with the rest mainly made up of Greek Orthodox, Catholics and Anglicans.

The community accounts for some 10 per cent of Egypt’s 100 million people, with the largest concentrations of Christians found in Cairo, Alexandria and the provinces of Minya and Assiut south of Cairo.

Egypt’s Christians have had a somewhat turbulent history in the Muslim majority Arab nation, with the community occasionally suffering outright persecution but generally living in peace with their Muslim compatriots. But radical Muslims who have first emerged in the 1970s have whipped up anti-Christian sentiments, something that has, in turn, led to an upsurge in attacks against their places of worship, church-linked facilities as well as their businesses and homes.

More recently, ISIS has vowed to go after the Christians, claiming responsibility for a series of attacks against churches packed with worshippers starting December 2016.

The discrimination many Christians complain about and the shift towards religious conservatism by many Egyptian Muslims over the last 50 years have forced hundreds of thousands of Christians to migrate, starting new lives in growing communities in places as far afield as Australia, Canada and the United States.

Here is a look at major attacks against Egypt's Coptic Christians in recent years:

November 2: Masked gunmen riding pickup trucks opened fire on three buses carrying pilgrims to the remote desert monastery of St. Samuel the Confessor south of Cairo, killing 7 and wounding about 20. IS claimed responsibility for the attack.

May 26, 2017: Masked militants riding in three all-terrain cars open fire on a bus carrying pilgrims on their way to the Monastery of St. Samuel the Confessor, killing 29 and wounding 22. ISIS claimed responsibility for the attack.

April 2017Twin attacks by suicide bombers hit churches in the coastal city of Alexandria and the Nile Delta city of Tanta. At least 43 people are killed and scores of worshippers injured in the Palm Sunday attack, which narrowly missed a ceremony presided over by Pope Tawadros II, spiritual leader of Egypt Orthodox Copts, in Alexandria's St. Mark's Cathedral. ISIS claimed responsibility for the attacks.

February 2017: Hundreds of Egyptian Christians flee their homes in the northern part of the Sinai Peninsula, fearing attacks by ISIS. The group's North Sinai affiliate had killed at least seven Coptic Christians in the restive peninsula in less than a month.

December 2016A bombing at a chapel adjacent to Egypt's main Coptic Christian cathedral in Cairo kills 30 people and wounds dozens during Sunday Mass in one of the deadliest attacks carried out against the religious minority in recent memory. ISIS claimed responsibility.

July 2016Pope Tawadros II says that since 2013 there were 37 sectarian attacks on Christians in Egypt, nearly one incident a month. A Muslim mob stabs to death a 27-year-old Coptic Christian man, Fam Khalaf, in the central city of Minya over a personal feud.

May 2016: A Muslim mob ransacks and torches seven Christian homes in Minya after rumours spread that a Christian man had an affair with a Muslim woman. The elderly mother of the Christian man was stripped naked and dragged through a street by the mob.

New Year's Eve 2011A bomb explodes in a Coptic Christian church in Alexandria as worshippers leave after a midnight mass, killing more than 20 people.

If you go
Where to stay: Courtyard by Marriott Titusville Kennedy Space Centre has unparalleled views of the Indian River. Alligators can be spotted from hotel room balconies, as can several rocket launch sites. The hotel also boasts cool space-themed decor.

When to go: Florida is best experienced during the winter months, from November to May, before the humidity kicks in.

How to get there: Emirates currently flies from Dubai to Orlando five times a week.

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Trump has so far secured 295 Electoral College votes, according to the Associated Press, exceeding the 270 needed to win. Only Nevada and Arizona remain to be called, and both swing states are leaning Republican. Trump swept all five remaining swing states, North Carolina, Georgia, Pennsylvania, Michigan and Wisconsin, sealing his path to victory and giving him a strong mandate. 

 

Popular Vote Tally

The count is ongoing, but Trump currently leads with nearly 51 per cent of the popular vote to Harris’s 47.6 per cent. Trump has over 72.2 million votes, while Harris trails with approximately 67.4 million.

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Price, base / as tested Dh326,700 / Dh342,700

Engine 3.0L V6

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Fuel economy, combined 9.1L / 100km

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TV: The match will be broadcast on OSN Sports Cricket HD. Subscribers to the channel can also stream the action live on OSN Play.

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