Lessons the euro can offer the GCC on monetary union

While the discussion about a unified GCC currency and its peg against the dollar has taken the limelight, the broader process of an integrated economic system for the GCC that might emerge from the birth of monetary union is more important.

The global financial turmoil has not only thrown in doubt previously held beliefs about regulating the banking system, but also raised some unthinkable questions, such as the future of currency blocs like the euro.

The same uncertainties about the direction and approach in managing the financial crisis seems to have affected GCC countries, with the UAE believing that an open and liberal regulatory regime is still valid, while Saudi Arabia has opted for a more regulated regime. Once again the EU model stands out. The UAE’s decision to withdraw from a GCC currency union echoed Britain’s decision to opt out of a common currency.