Let me illustrate by discussing some of the so-called preconditions enumerated in the early literature and looking at their evolution within the euro area. Mundell, in 1961, identified high mobility of the factors of production (both capital and labour) as a precondition for giving up the use of the national exchange-rate.
While labour mobility is still low within the euro area, reflecting, in part, linguistic and cultural differences, the mobility  BIS Review 54/2008  3  of capital has been increasing as evidenced by the positive effect that the euro has had on intra-euro area FDI.