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Draw lessons from euro zone crisis, EAC urged

Discussion in 'International Forum' started by BabuK, Oct 27, 2012.

  1. BabuK

    BabuK JF-Expert Member

    Oct 27, 2012
    Joined: Jul 30, 2008
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    East African countries working towards greater integration including having a common currency have been urged to take leafs of experience from other group initiatives such as the European Union in the aftermath of the euro zone crisis.

    East African Cooperation Minister Samuel Sitta made this appeal in a speech at an opening and public lecture of the Open University of Tanzania (OUT), marking its 20th anniversary. OUT also held the 22nd General Meeting of the Convocation at the Ali Hassan Mwinyi Hall at its Biafra Campus along Kawawa Road in the city.

    "Full implementation of the Customs Union and Common Market protocols is a necessary condition for attaining real economic convergence in the region and qualify for an optimum currency area capable of establishing a sound and robust monetary union," the minister stated.

    "The experience of the European Union shows that the road towards monetary union is challenging, and attainment of agreed nominal convergence criteria without underlying real economic convergence is not sufficient for the creation of a sound and sustainable monetary union," he further stated.

    He said that enforcement of financial sanctions against sovereign states is very difficult, in which case adherence to the fiscal rules will depend on the willingness of the states and national developmental challenges, he told the gathering.

    Real economic convergence will lead to homogeneity in national policies among partner states, he said, cautioning against conflicts between national and regional economic policies as this could hamper the functioning of a monetary union.

    Proper coordination of regional monetary policy and national fiscal policies is critical for the functioning of a monetary union, he pointed out, noting that the system of central banks is an appropriate model for the proper functioning of monetary policy in a union.

    In the case of EU, currently some member states such as Greece and Portugal are in serious financial crisis, adversely impacting the euro zone due to non-compliance to Maastricht Treaty criteria. This includes maximum levels of sovereign debt at three percent of GDP and disclosure of borrowing, in the aftermath of the euro crisis upon which the EAC is trying to learn and adopt preventive measures.

    Negotiations for the East African Monetary Union will ensure all agreed macro-economic convergence criteria are strictly adhered to by introducing a surveillance and enforcement mechanisms, the minister intoned.

    The 20th anniversary of the OUT since its establishment in 1992 reaches its climax tomorrow at the university's permanent headquarters now under construction at Bungo, about 40 kilometres from Dar es Salaam on the Morogoro Highway, an
    event slated to include top government officials and invited institutional heads.