A senior economist with the International Monetary Fund (IMF) is warning member countries of the Eastern Caribbean Currency Union (ECCU) that they face similar challenges now confronting the Eurozone countries.
Alfred Schipke, formerly of the IMF Western Hemisphere Division, said the Eastern Caribbean Currency and Economic Union, may be the smallest of three economic and currency unions worldwide, bringing together eight small islands, whose total combined population is less than a million.
But he said it is an interesting microcosm of the Euro area and the challenges it faces following the global economic crisis of 2008.
Schipke has edited a new book on the Eastern Caribbean Currency and Economic Union and in an interview posted on the IMF website, said the member countries of the union Antigua and Barbuda, Dominica, Grenada, St. Lucia, St. Vincent and the Grenadines, St. Kitts-Nevis, Montserrat and Anguilla all have many similarities including the same colonial history.
In terms of the benefits given the small size of these countries it allows these countries to take advantage of sustained economies. It also allows them to what we call diversify risk, one country gets hit by shock or hurricane then they can pool resources and deal with those shocks more effectively.
But most importantly because of the size of the islands they can provide at the regional level, more cost effective public services (and) thats the major benefit.
He said what does matter is that if those countries speak with one voice they can have better representation at the global level.
Interestingly enough the Eastern Caribbean Currency and economic Union is actually a microcosm of the European Economic and Monetary Union since it has been faced by rising fiscal deficit, unsustainable debt levels in a number of states, a lack of fiscal integration and challenges in the financial sector that are threatening the underpinnings of the union.
Just like in the European Currency Union overcoming these challenges are particularly difficult in monetary unions, he said, adding sometimes you need a crisis to implement reforms.
So there are opportunities and I think there is a general feeling in the region that further integration is needed to ensure the viability of the union, but in the European Union you would need to put political capital into the reforms, he said.