CURRENCY COMPETITION IN THE EUROZONE: AN ANSWER TO THE CRISIS

Abstract

The common currency was created as a result of theoreti cal considerati ons regarding the functi oning of opti mum currency areas. This theory refers to a number of benefi ts as well as costs. It imposes a number of requirements that are necessary for the newly created structure to be considered opti mum. The economies of Eurozone countries did not meet these requirements. In consequence, the present functi oning of the Eurozone encounters many disturbances – the strong diff erenti ati on of the balance of payments is a signifi cant example. The reforms initi ated in the European Union and undertaken in response to the fi nancial crisis encompassed the Eurozone countries, yet they only concern fi nancial policy. The adopted strategy of acti on arouses questi ons as to its eff ecti veness. The aim of this arti cle is to present one of the reasons for the Eurozone crisis and a proposal for changing the monetary policy, in parti cular the exchange rate. In view of this objecti ve, the main hypothesis reads as follows: one of the methods of counteracti ng the crisis is to introduce currency competi ti on within the Eurozone.