The crisis in the eurozone will not damage or reverse the growing impetus toward economic cooperation and integration in Asia, experts agreed yesterday.
But events in Europe will force policymakers to think hard about the implications of closer monetary cooperation, they argued.
Warnings were sounded before the launch of the euro in 1999 that, by locking themselves together in monetary union and with a single currency, European nations could set up fiscal strains that would test or even destroy the union, they noted.
Fiscal policies must be closely aligned before less flexible currency regimes are attempted, ADB president Haruhiko Kuroda said at a press briefing.
The single European currency has been a great achievement, but the current situation shows how challenging it is to align fiscal policies to meet the demands of a common currency, he said.
His warning was echoed by University of California economics professor Barry Eichengreen, who suggested at a seminar that the crisis in the euro will make everyone think very carefully about the prerequisites for monetary integration in Asia.
But integration in Asia is far less advanced than in Europe, Masahiro Kawai, dean of the Tokyo-based ADBI Institute, said. There is a huge agenda of integration initiatives that can be undertaken in Asia before the region is ready for close monetary cooperation.
Kawais comments came on the same day that the ADB published a landmark study, arguing that Asian economic integration is ready for a major new advance now in the form of a network of institutions for regional cooperation.
Views differed over whether problems in Greece and other European economies can be contained within the eurozone, or whether they are likely to result in contagion via financial markets that will spread to other parts of the world.
It is probable that the Greek crisis will be dealt with appropriately and the crisis will be resolved shortly, Kuroda told Emerging Markets. The impact on Asia has been negligible so far and I think this will continue to be so.
But Kuroda acknowledged at a briefing that we cannot disregard the possibility of contagion spreading from Europe to Asia and other regions of the world given the globalisation of financial markets.
Harinder Kohli president and CEO of the Washington-based Centennial Group, said that so far, financial markets have discriminated between what is happening in the euro area and the situation.
But should the Greek crisis spread to Spain and possibly Italy also, then the world asa whole cannot be unaffected, said Kohli, a former senior official of the World Bank.