What would happen if the Arab countries (Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Oman, State of Palestine, Qatar, Saudi Arabia, Syria, United Arab Emirates, Yemen) combine their economies like Europe? Will it be capable of replacing the dollar as the reserve currency? How would the rest of th

Considering a union much stronger than the GCC is actually established and the Islamic principles aren't followed just so that it seems to more liberal to Western and non-Islamic countries, there is one fundamental characteristic that the Eurpoean countries have and the Arabian countries lack in abundance ie Capitalism. The common feature among most Arabian countries (barring a few) include their OPEC membership. Most of thewe economies are driven by oil production and exports. The reserves in some ountriea like Bahrain & Oman which initially had the first mover advantage, now face falling reserves and are forced to diversify into capital intensive industries to drive their economy.While this process has jut begun in Arabian countries, it has been prevalent in european countries since forever.Besides with the discovery of Shale oil in the US, Arabian coutries shalllose their only stronghold soon unless they http://diversify.So I personally feel that even if an Arabian union emerges, it surpassing the EMU is pretty bleak.

It will be one of the strongest global economies, if not the strongest, but this will never happen with the current regimes and systems. It will definitely be stronger than the EU.

People always make rosy proclamations based on Islamic principles, but they fall flat when implemented. So rather than have countries self-destruct by implementing Islam (unless they can blend in huge oil reserves and hypocrisy), let's look for other causes. One such experiment- a union between Syria and Egypt named the http://en.wikipedia.org/wiki/United_Arab_Republic, was a failure. The EU worked because intense warfare had struck Western Europe a few times per century for too long. Every effort was needed to avoid future conflict after the destruction of WW2, so other national interests had to be de-prioritized by member countries . In contrast, what unites GCC countries other than the Shia bogey (which appears instigated by the US)? The answer is their sense of insecurity. They are all fundamentally unstable monarchies. Americans know this well; hence they have not offered to broker talks between Bahrainis (overwhelmingly Shia) and their rulers (who love to have the US 7th fleet around). However, if peace returns to Syria, Lebanon and Iraq, one could see strong reasons for their getting close to Turkey. But obviously, this is too difficult to forecast.

If you did get such a wide regional federation together that ended up becoming as cohesive economically and politically as the Eurozone, such a polity could become a major power. The key issue here is "if". Multiple attempts at Arab regional federation have occurred, and failed. The most advanced one, the GCC, is a fairly homogenous union--having all its member-states be high-income and status quo petro-monarchies is a good starting point for unity--and even it has failed to become EU-like, fears of Saudi hegemony and whatnot. Having a much bigger federation that would include countries with much larger populations, much less developed economies, substantially different cultures (having Shi'ite-Kurdish Iraq in this union doesn't seem likely to me), and very different political cultures would be impossible. What common ground would there be? The scenario you set forth would be akin to the planners of the future European Union hoping to bring everyone in Europe into the Union from the start. Fascist Spain, Communist Yugoslavia, Communist and Soviet-occupied Poland, social-democratic Nordic states, global powers like France and Britain--everyone. Such an organization would clearly be impossible: there would be far too many differences among the member states. Best to start small, with a clutch of countries at similar levels of economic development with similar political cultures devoted to the tasks of European integration. Later, as countries changed, they could join. Or not.

Total GDP might be around 10% of either EU or US. The dollar is the reserve currency because East Asians hold and use it, not because of oil. Why not have an economic area consisting of South and Southwest Asia instead? The Gulf hires most of its labor from the subcontinent and its oil is the subcontinent's largest import.

I don't think that's possible in the current political climate; even the most successful Arab union, namely the GCC, is cracking at the seams. Last year Oman threatened to leave if KSA keeps pushing for greater military integration and KSA, UAE and Bahrain withdrew their ambassadors from Qatar because of differing foreign agendas (in Egypt in particular).

Its a good idea to form ARAB UNION on the lines of European union and create a common currency like EURO. First the combined arab union economy should surpass US interms of GDP. The financial markets of arab union should be deep and broad enough and instil confidence in the rest of the world countries, to keep their forex reserves in Arab union common currency. 67 percent of all countries forex reserves are kept in USD and 23 percent kept in EURO as of now. If Arab Union follows Islamic Economics by which I understand that they will not pay interest on their bonds, should have an alternate mechanism of compensating other countries for keeping their surplusses with Arab Union.