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Thu 11 Nov 2010 08:33 AM

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GCC single currency can learn from Euro crisis

Bahrain’s Sheikh Mohammed says Gulf fiscal policies need to be in sync before monetary union launch

GCC single currency can learn from Euro crisis
(AFP/Getty Images)
GCC single currency can learn from Euro crisis

The Gulf nations should draw lessons from the Euro crisis as they move towards a monetary union, the man charged with boosting economic growth in Bahrain has said.

“It [the currency union] is the right goal to have and we need it,” Sheikh Mohammed bin Essa Al Khalifa, CEO of the country’s Economic Development Board (EDB) told Arabian Business during an interview in Bahrain.

“But we saw with Greece and the euro, it’s actually worth pausing to learn from the lessons. And one of the lessons is, how in sync are your fiscal policies?

“Monetary policy is not enough and having standard convergence criteria may not be enough,” he added.

Sheikh Mohammed said that he did not see the single currency taking place in the near future, but stressed that a union was technically more challenging than most people realised.

“There is strong political desire for it, as our countries in the Gulf develop and become more mature, we need more policy levers to manage our economy,” he said.

“Having our own currency that’s linked to our own economic cycle is important. Currently our own interest rates are set by Mr Bernanke [chairman of the US Federal Reserve], effectively.”

The UAE withdrew from the GCC monetary union project a year ago, while Oman quit in 2006. The four remaining Gulf countries launched a forerunner for a proposed central bank in March this year.

In May, Abdulrahman Al Attiyah, secretary general of the GCC, said that he expected that Oman and the UAE would rejoin the single currency, but only after it had been launched.

He also added that he did not see the monetary union being launched before 2015. An initial agreement had planned for the launch of notes and coins in 2010, but the GCC abandoned those plans last year.

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