Abstract:

The EMU membership necessitates only the fulfillment of Maastricht Convergence Criteria and the 'Endogeneity of OCA criteria' hypothesis seems to be the silent code both behind its sustainability and enlargement. However, asymmetric shocks and the asymmetric transmission of the monetary policy of ECB may jeopardize the sustainability of EMU. The econometric analysis of co-integration of long term interest rates also puts forward the asymmetries of business cycles between EMU members, 7 years after its launch. In case of an asymmetric shock, the lack of flexibility of labor markets and the level of economic integration in some EMU members are prone to pose serious problems. In terms of real convergence, the GDP per capita of EMU members is diverging rather than converging. The dispersion of growth rates and the loss of competitiveness of some EMU members are also serious threats. The enlargement of EMU seems to further aggregate the problem as it will make the ECB 's one monetary policy harder to fit to an enlarged all. The new EMU members will face a dilemma between nominal and real convergence due to their catching-up process. The EMU candidates are considered as small open economies, the problems of which would not even be felt in EMU, but the prospect EMU members will surely suffer at home in case of such asymmetries. The endogenity of OCA criteria might still slowly progress but asymmetric shocks will not wait for them to realize during the coming two or more decades. Thus, the new EU member states have to evaluate their economies also in terms of OCA criteria and real convergence and should be more cautios in their rush to EMU. In the euro zone, precautions should be taken for possible asymmetric shocks in terms of a sufficient federal budget and a system for fiscal transfers. 

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