Re: Re: Spain to have the largest increase in exports of EZ in 2

#116207
zenkarma
Participant

@Rocker wrote:

Spain would have a new currency, not necessarily the Peseta, and a 40% devaluation would follow. It’s exactly what the country needs. It’s exports would rise even further, the tourist trade would go through the roof, and the empty houses would be snapped up by the northern Europeans.

Nice theory, but it won’t work in practice because you assume everything will drop with the devalued currency – it won’t it will rise to match it. Example:

A house is on the market now for €100k. In sterling that would be say (£100k / €1.10) = £90k. The Spanish currency gets devalued by 40% to lets say Southern Euros (SE) £1 now equals SE€ 1.55, that house should now be £90k / SE€1.55 = £58k, but it won’t be it will be SE€139k (SE€139k / 1.55) = £90k.