- This topic has 22 replies, 14 voices, and was last updated 16 years, 3 months ago by
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rt21 wrote:If ECB rates start to increase I have a strong feeling that Spain will leave euroland.
Richard
It was almost a Black Friday for Spain :
Euribor highest level ever 5,4%.
Road transport strike from Monday ,which could lead to shortages in petrol stations and supermarkets.
Stock market down 2,5%.
Oil prices up 10% on day.
Trichet saying interest rates likely to go up.
Over 60% of estate agents have closed down, since the boom ended..All this shows the fallacy of the Euro, 23 or so different economies all looking for different economic scenarios.
Spain can do nothing to remedy the situation, its competitive position is shot to pieces due to high Euro. Many other countries must be in a worse position, the only solution will be for a break up of the Eurozone, perhaps into several groups.
Some good news could be that CB Richard Ellis has just closed its first internet auction. 11 properties were sold for a total of 3,1m euros, which was about 20% of the number put up for sale..
The sale prices were below expectations.
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I have to agree with you Richard. I have seen a few times now murmours of Spain leaving the Euro, along with Italy, Greece and Portugal. I am sure there are mechanisms to stop them leaving but I am also sure any determined government would just leave if it wanted to.
If there was talk at government levels of countries leaving the Euro I am sure the Euro would soon be on its way down at a rapid rate.
Lets hope!
Bernie
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Agree that the only way Spain can help itself is by cutting interest rates and devalueing its currency, problem is it can’t do that shackled to the Euro. Politics wont allow anyone to leave so the powerhouse Germany gets whatever it needs and tough on the rest. I still dont know exactly what it would take for 1 member to leave, maybe Irelands vote on the constitution can get the ball rolling.
Should it happen Spain would get the Peseta back and probably Gbp/Pestea would go to 250 area 20pct devaluation which is a 1.50 Euro/Gbp rate. -
The Euro is not a currency that any country can dip in and out of.
It is also virtually impossible to extracate Spain from the Euro, as if Spain suffers the economic collapse as expected, it will need the “German Powerhouse” to contribute more and Spain will be a recipient again of EuroAid.
It would be madness to pull out during a recession, as that is when an ailing country will benefit from the richer countries.
I do believe the Euro will see a drop in value at the end of the summer. But in no way could Spain consider walking away. If it did, it would almost become a 3rd world nation again.
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In all honesty, the Spanish need to suffer a few years of hardship.
Their economy has boomed through a world wide boom. However the average Spaniard beleives their economic miracle is all their own work!
They have gotten used to selling their land and exporting their vegitables though the latter is aided by european subsidies. The former by illegal reclassification.
It is not at all their own work, as we can now see, it is their own mess.
As the black 4x4s are repossessed and their property millionaires go to jail or become bankrupt, the Spanish will not be so cocky and their artificial new found confidence will be rather shaken as the thought of returning to their donkeys seems realistic.
A realignment of 2-3 years, will highlight what little of their profits went into sustainable industry and expose how much went into worthless luxury appendiges.
I´m sure many here on the forum who lost out to the Spanish system would enjoy watching this inevitable fall from grace.
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Well it will be interesting to see Spain’s reaction next month to the hike…
I’m not sure if most people remember that soon after the Euro was launched it plunged and was on the point of collapse. Maybe a sharp move upwards this time will bring it to crisis point.
I think Trichet’s comment show that he does have some connection with the real world, unlike his half witted counterpart Bernanke.
There is no point in asking for rate cuts -the central banks no longer control the cost of borrowing, and the market has clearly indicated that the period of cheap credit is well and truly over. The investment banks are busy deleveraging and the high street banks are reducing their lending, removing credit from the system.
Whether Spain is in or out of the Eurozone they cannot ignore this reality. -
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@Peter Good wrote:
The Euro is not a currency that any country can dip in and out of.
I hope the British government is aware of that
@Peter Good wrote:
It is also virtually impossible to extracate Spain from the Euro, as if Spain suffers the economic collapse as expected, it will need the “German Powerhouse” to contribute more and Spain will be a recipient again of EuroAid.
Do the Germans know this? It’s very generous of them but did they know that they would be carrying the weaker countries? I think they expected economies to converge, not just currencies.
@Peter Good wrote:
I do believe the Euro will see a drop in value at the end of the summer. But in no way could Spain consider walking away. If it did, it would almost become a 3rd world nation again.
Does it deserve to be considered a third world country given the way it conducts its business?
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In some ways I think the spanish government would prefer to stay in the euro because to come out of it would show that the spanish economy is weak and of course it may be difficult to withdraw in an orderly fashion. It would also be a double edged sword. A devaluation would stimulate its exports but expose it to higher costs of imports particularly oil.
However, it is clear that the powers that be are managing the euro based on a german economic model, which is a one fit for all members. A rising euro on the back of an increase in interest rates is the last thing Spain needs when its GDP is falling and unemployment is rising.
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Excellent post Peter Good, how long will it be before those abandoned lemon groves seem like a viable proposition again, Lovely people the spanish but they are too single minded to have seen this crash coming, where I live close to torre del mar the new secondary school that was due to be completed for this september has even come to a standstill.
Ronnie
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I also feel that it is impossible for Spain to leave the Euro. There is more chance of them being kicked out IMO 🙂
But, really these interest rates are not that high. People have become spoilt over the last few years, a bit of financial pain will help everyone in the long run I reckon. Tough medicine to take, but needed.
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ronniedisco wrote:Excellent post Peter Good, how long will it be before those abandoned lemon groves seem like a viable proposition again, Lovely people the spanish but they are too single minded to have seen this crash coming, where I live close to torre del mar the new secondary school that was due to be completed for this september has even come to a standstill.
Ronnie
I think this will be a sign of the times , councils got used to spending vast fortunes of money each year on the back of European money from Madrid and booming numbers of building licences. Where will the money come from now for these grandiose schemes? As these two sources of finance are now almost nil.
Parking fines?
Big increases in Council Tax?I cannot see them unloading the thousands of extra staff taken on during the boom.
Many councils are also up to their necks in debt,having taken on loans at low interest rates.
Problems for councils I can see becoming the next can of worms.
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135, they are trying to plug the revenue gap with parking fines and speeding tickets. Motorists beware.
http://www.spanishpropertyinsight.com/buff/?p=113
And yes, skint town halls are going to be a big problem in the not too distant future, along with water.
Mark
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As someone who lives in Spain, but whose income (like I’m sure many of the other people on here) is in Sterling, I would love nothing more than to see Spain leave the Euro.
However, I cannot see what the mechanism for withdrawal could possibly be?
From another forum discussing this exact subject:
As other posters have pointed out, Spain would only leave the Euro for the purpose of cutting interest rates, devaluing the currency and trying to kick start their economy back to life.
I think the biggest practical problem they would have in trying to do this would be how to handle the currency swap, given that anyone holding Euros would have a huge incentive to hide them under the matress / take them across the border and wait until the devaluation before swapping them back into “new” pesetas. Why would anyone leave their Euros in a Spanish bank account and wait for it to become worthless?
The implications of this would be a complete collapse of the spanish banking system, massive capital flight and huge distributional inequality between those who had euro-denominated assets that avoided redenomination and those who didn’t.
Interestingly, it would be much easier for a country at the other end of the economic scale to leave the euro – ie one which has an overheating economy with a current account surplus, and needs higher interest rates and revaluation.
http://www.housepricecrash.co.uk/forum/index.php?showtopic=77834&st=45
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It was always known that different parts of the Eurozone were out of sync in there economic cycles with others. I feel that Spain, and the EC always expected this to happen, my guess is that over time Spain will drift into line with France & Germany… Could be a long time though.
What worries me more about the current situation is the problems for Spanish nationals, and the reaction. I believe many Spaniards have high levels of personal debt, unemployment will continue to rise and times are going to be tough for many people for a good while. I can see the possibility that the foreigners will start to become scapegoats for the problems. After all we see this all the time in the UK press.
Anyway, I hope I’m wrong about all this. But, I do think this is a strong possibility
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