ABSTRACT
This chapter analyses which indicators a country can use to choose both the right partners to integrate with and the right form of integration (Monetary Union, Customs Union, or both) with these partners. The relevant variables turn out to be openness, level of development, factor mobility and federal budget redistribution. The results are applied to assess the economic rationality of the processes of integration and disintegration in Europe. Both the Euro's and the rouble's desirability as a shared currency can be questioned on account of limited factor mobility and budget redistributive capacities. A former Soviet Customs Union might very well be ‘trade diverting’, but can prove helpful as an instrument of development policy.
