We can see quite clearly in current events in Greece, Portugal and Ireland, that it's possible for a currency area to over reach its optimal size. The benefits of one currency are, in regions that are simply too disparate, outweighed by the disadvantages of exactly the same thing, one currency.
This should not really surprise us all that much, our entire universe is full of examples where bigger (or indeed smaller) brings with it certain problems. You don't have to make Jupiter all that much bigger than it is to make it a sun, which would be something of a problem if you were simply trying to gain a larger planet. You can't simply miniaturise an elephant to the size of a mouse and expect it to work: ratios and proportions will be all out of whack.
One of the things we're told about that eurozone is that because the European population is so much less mobile inside the EU than the US population is inside the US then that eurozone is less of an optimal currency area than the US is. However, this is usually brushed aside with the hope that we EUites will become more mobile and thus make the currency work.
Hmm:
Abstract: Americans have always been viewed, both by themselves and by others, as a migrant society. However, migration rates have reached record lows: only 1.6% of Americans moved from one state to another in 2009, and only 3.7% moved from one county to another. This research conducts a decomposition of the change in migration rates between 1999 and 2009 using data from the Current Population Survey. The analysis concludes that about 63% of the decline in migration rates between 1999 and 2009 can be attributed to the direct effects of the economic crisis that began in 2007, and another 17% of the decline can be attributed to demographic changes (e.g. the aging of the population) but that the remaining 20% of the decrease in migration is due to a decline in migration behaviour, or increased rootedness, that applies to all demographic categories. The discussion focuses on the implications of the universal, or secular, rise in rootedness for migration studies.
But maybe it isn't true that migration rates always increase? Maybe, as here, they decrease, meaning that the EU will become ever less, rather than ever more, an optimal currency area?
