Introduction of the Single Currency in EAEU Requires a Moderate Haste

• 11.13.2015, 10:54
• Lilia Amirkhanyan
•  EEU,  "Insight" Analytical Center ,  World,  Analytics

Rumors about the creation of single currency in the territory of Eurasian Economic Union (EAEU) are logical and expectable.  Theoretically, the classical model of deep and comprehensive economic  integration between two and more countries assumes the existence of a single currency. Most likely, this is the model EAEU aspires to (at least in all participating countries there is similar political will).

The followers of the EAEU processes have heard about creation of single currency, still in  the early stages of union formation.  Later they talked about other options; evraz or altun. Anyway, the currency name is not as essential as the date of its introduction. Circulating views are mainly divided into two groups; EAEU would have single currency in the next two or three years or the process will last for decades. Some haste is seen in the statements of representatives of several agencies.

It should be noted that surprisingly in reality  some haste is required for the process. Taking into consideration the fact that EAEU relates with other economic unions and areas, as well as faces the challenges of integrated and internationalized currencies such as euro and dollar, it is logical that with separate foreign elements or by separate  financial and economic mechanisms, run by individual member states, the maintenance of  a competitive position would be difficult.  Thus, the necessity of creating a unified monetary system (mid-term) is more than evident. However, this should not prevent the implementation of evolutionary investment system, which will insure member countries from facing balance violations of single currency and from the appearance of  financial bubbles.

By the classic approach, taking into account the most successful experience of the introduction of euro, decades are needed for the transition into a single currency.  It is clear that before the transition into single currency, the creation and implementation of the single payment and other systems require a lot of time.  In addition, it should be noted that there is purchasing power parity, which should be established specifically for the currencies of member countries and only in the case all currencies are at the defined passage level we can pass to the transition into single currency, avoiding cracks that threaten the financial system.

If eventually we try to understand which option is the most reasonable and whether Eurasian community is ready for the transition to the new currency in the next two-three years, in my opinion, it is not the appropriate moment to launch the process. EAEU member countries have just begun the withdrawal process of dollar from strategic goods trade, which should contribute to the creation of the single payment system. Only after the creation of that system and the formation of a unified parity, the transition to the single currency can only be thought about, be it evraz, alten, or a third named another currency. EAEU member countries’ economies are not yet ready to this process, it is most likely not to expect single currency within the next two or three years, but, on the other, it could also not last for decades.