The Euro, bad for Spain.

**Pepe** · 11 Feb 10,, 23:57

I'm from Spain and this recession is really horrible :(:(:(. The problem here is the euro.

Spain and other South Europe contries simply cannot belong in the Eurozone. We have lower industrial productivity than Germany and North Europe, we cannot share the same monetary policy.

Take a look at the Spain's huge trade deficit and the German huge trade surplus. Spain needs a devaluation of its currency to correct this, but this is impossible with the euro, we cannot play the devaluation card anymore, and the correction is via salaries and unemployment.

And its not only the devaluation problem. In the past years, Spain needed high interest rates to avoid its construction boom, and Germany needed low interest rates to stop consumers from saving and get them to spend. Obviously Germany "won" and the euro interest rates were low (its logical to hurt 45 million people, to help 85 million people and not the opposite). If both economies weren't tied to the same monetary policy, they could both have done this easily and both economies would have been in much better shape to enter this recession (specially Spain).

Another bad thing is that the euro has raised consumer goods prices like food a lot (leveling them with the higher north european prices), but not the salaries (the salaries belongs productivity).

The only good thing is that the recession (and Brussels) is going to force our government (an extremely bad government, Zapatero is simply retarded) to do what must be done, a liberalization process in our economy (to improve our productivity). But i think it wont be enough because Zapatero is ultra-left, and our ultra-left syndical leaders still have a lot of power.

We need a Margaret Thatcher... :(:(:(

(Sorry for my poor english, but my english teacher says is good for me to participate in english forums, and i like it

)

**gunnut** · 12 Feb 10,, 00:17

I'm no expert by far. But I wonder how the US deals with this?

We are actually 50 small nations banded together with a common language and currency. Obviously we have a unified monetary policy for all 50 states. Economically speaking, EU shouldn't be too different.

You have some nations with high productivity and some nations with lower productivity. We have some states with high productivity and some states with lower productivity.

Things in California and New York are outrageously expensive compared to Mississippi and Alabama. Of course, wages are much higher in California and New York than in Mississippi and Alabama.

I wonder if there's something EU can learn from the US.

**dave lukins** · 12 Feb 10,, 00:59

Originally Posted by Pepe

(Sorry for my poor english, but my english teacher says is good for me to participate in english forums, and i like it

)

Your english is just fine

..Spain, Greece and Eire are all having monetary problems at the moment.

"Another bad thing is that the euro has raised consumer goods prices like food a lot (leveling them with the higher north european prices), but not the salaries (the salaries belongs productivity)."

This happen to all Countries and it is a disgrace. Governments need to clamp down on this :( but don't hold your breath

**tankie** · 12 Feb 10,, 15:13

It was just another con , like when the UK converted to decimalisation , the goods doubled overnight , frinstance a chocolate bar costing 6 pence was still 6 pence But THE NEW 6 PENCE was double the old 6 pence , it became more than a shilling when the old 6 pence was half a shilling , you still with me ??

When i was serving in Germany the Mark was the currencey , there were 8 marks to the pound ,,beer was 50 pfg a bottle = 1 pound ,= 16 bottles woo hoo , good times were had , now they have the dreaded euro and its about one for one , bad times are had , goods pricy ,and tourism as is everywhere these days is down , boozers are shutting as are other outlets ,im glad the UK told em to stuff it . The German economy stayed the same for the last 3 months of the year 2009

**crooks** · 12 Feb 10,, 20:15

Interesting comments, I feel they are mostly wrong Pepe, but I digress - the Euro has been a spectacular development for it's member states, and countries like Spain and yes Ireland should be glad to be in it.

Us PIGS gambled too much money on property fueled growth and had the incompetence of gluttoness excess shown, while the Germans, Dutch and French's strong and intact reputations kept our shared currency afloat.

A Peso or Punt would be worth jackshit right now internationally, thank the gods above for the ECB, or else Greece would have to be renamed 'New Iceland'.

**PubFather** · 12 Feb 10,, 21:02

I tend to agree with the initial poster about the problems of having a similar monetary policy across such totally divergent economies.

The problem probably does exist in the USA but is possibly less obviously blamed as the US has had a single currency for so much longer and therefore its component parts dont seek to analyse the impact of a centrally defined interest rate.

Equally, in the Eurozone it can quickly become a nationally based issue - and therefore more controversial. In the UK, the interest rates have frequently favoured the South above the North.

There are huge advantages to the Euro - but also big drawbacks. Spain, unfortunately, is always going to come second to Germany in terms of political and economic muscle.

**kato** · 13 Feb 10,, 04:21

Originally Posted by tankie

now they have the dreaded euro and its about one for one , bad times are had , goods pricy

It's not really one-to-one. More like 0.75-to-one, even if people bitched about it a lot.

Plus, i can shop across the border now without having to dig out the French Franc coins.

**zraver** · 13 Feb 10,, 06:23

Originally Posted by gunnut

I'm no expert by far. But I wonder how the US deals with this?

We are actually 50 small nations banded together with a common language and currency. Obviously we have a unified monetary policy for all 50 states. Economically speaking, EU shouldn't be too different.

The big industrial producer states fund massive outlays to the rest of the country. I don't know if Europe does this or not. Say Spain is one side with Arkansas and Germany and New York ar eon the other. To keep Spain solvent since it lacks a competitive advantage vs Germany, you have to have Germany giving money to the EU the way NY gives taxes to the feds. Then EU could spend that money in Spain via projects, jobs, grants, and subsidies the way the Fed does in Arkansas.

**gunnut** · 13 Feb 10,, 06:32

Originally Posted by zraver

The big industrial producer states fund massive outlays to the rest of the country. I don't know if Europe does this or not. Say Spain is one side with Arkansas and Germany and New York ar eon the other. To keep Spain solvent since it lacks a competitive advantage vs Germany, you have to have Germany giving money to the EU the way NY gives taxes to the feds. Then EU could spend that money in Spain via projects, jobs, grants, and subsidies the way the Fed does in Arkansas.

I thought that's the norm for EU...

**tankie** · 13 Feb 10,, 15:38

Originally Posted by kato

It's not really one-to-one. More like 0.75-to-one, even if people bitched about it a lot.

Plus, i can shop across the border now without having to dig out the French Franc coins.

Today it is one pound = 1,151 euro.

**Aussiegunner** · 14 Feb 10,, 02:40

I'd suggest that countries like Spain would be ill advised to get rid of the Euro, even if it does cause a few problems due to regional disparities in economic growth rates. The single European currency reduces the transaction costs and currency risk associated with trading between european countries and consequently leads to increased gains of trade and competition. That is what is going to drive the productivity growth that countries like Spain need. Reform is going to be hard on people while it is occuring, but at least you have the option of moving to a European Union country that is doing better to work, as is your right as a European citizen. Migrating to find work is much harder for people trapped in small economies that aren't connected to a massive, wealthy market like the remainder of Europe. I'd be counting my blessings if I was you.

**Aussiegunner** · 14 Feb 10,, 02:43

Originally Posted by zraver

The big industrial producer states fund massive outlays to the rest of the country. I don't know if Europe does this or not. Say Spain is one side with Arkansas and Germany and New York ar eon the other. To keep Spain solvent since it lacks a competitive advantage vs Germany, you have to have Germany giving money to the EU the way NY gives taxes to the feds. Then EU could spend that money in Spain via projects, jobs, grants, and subsidies the way the Fed does in Arkansas.

Or you just get a lot of people moving from Arkansas/Spain to New York/Germany to find work.

**tankie** · 14 Feb 10,, 14:35

Heres an idea , why not have a worldwide single currency , the zonk , its worth exactly the same everywhere , does away with exchange rates and unscrupulous trading , in fact it could become universal , even as far as the the planet Krypton or ur,anus .

**tankie** · 14 Feb 10,, 16:11

Looks bad for Greece as well as Spain

A majority of Germans want debt-ridden Greece to be thrown out of the euro zone if necessary and more than two-thirds oppose handing Athens billions of euros in credit, a poll published on Sunday showed. Skip related content
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Vocal opposition to aid for Greece from members of Chancellor Angela Merkel's coalition also grew at the weekend with several senior politicians expressing scepticism, especially as Germany's own recovery is fragile.

The Emnid poll for Bild am Sonntag newspaper showed 53 percent of Germans asked said the European Union should, if necessary, expel Greece from the euro zone.

Athens has struggled to convince investors it is tackling its debt crisis and markets are nervous about a default.

EU leaders discussed the issue last week and offered words of support but failed to outline concrete steps, further unsettling markets. Euro zone finance ministers are expected to discuss Greece again on Monday and Tuesday.

Merkel has adopted a cautious stance on support, saying while Greece will not be left on its own, it is up to Athens to sort out its own problems.

The poll also showed 67 percent of Germans did not want Germany and other EU states to give billions of euros in credit to Greece.

"If we start now, where do we stop?" Michael Fuchs, deputy head of Merkel's conservatives in parliament, told Welt am Sonntag newspaper.

"I can't explain to people on unemployment benefit that they won't get a cent more but Greeks can draw a pension at 63."

In her first term, Merkel raised Germany's retirement age to 67 from 65 in an effort to rein in the deficit to meet EU goals.

RESISTANCE GROWING?

Merkel's coalition partners, the pro-business Free Democrats (FDP) are even more resistant to helping Greece.

"Solving this problem cannot be about aid for Greece," FDP budget expert Otto Fricke told Welt am Sonntag. "If anything, it's about keeping any damage away from German tax payers."

Germany suffered its sharpest post-war recession last year and the upturn in Europe's biggest economy stalled in the fourth quarter, data showed on Friday.

Such data fuels economists' warnings about helping Greece.

Former European Central Bank chief economist Otmar Issing, who has played a leading role in advising Berlin during the credit crisis, said financial support for Greece from euro zone countries would be misguided.

"That is the way to the whole building subsiding," Issing told Welt am Sonntag, adding Greece had to take further steps itself, pointing in particular to the generous pension system.

Harvard University economist Kenneth Rogoff even warned Germany could face similar problems to Greece.

"Germany's public finances are not on a sustainable path," Rogoff told Welt am Sonntag. "There will come a time when Germany will have its own Greece problem ... it won't be as bad as in Greece, but it will be painful," said Rogoff.

Germany's budget deficit is forecast to grow to 5.5 percent of gross domestic product in 2010 and Merkel has vowed to consolidate the deficit as soon as the recovery allows.

However Rogoff, a former International Monetary Fund chief economist, said helping Greece was unavoidable.

"As long as Germany isn't ready to kick Greece out of the euro zone, it must help," said Rogoff who also said an option would be for the Greek government to secure bridging credit.

**kato** · 14 Feb 10,, 18:29

Originally Posted by tankie

A majority of Germans want debt-ridden Greece to be thrown out of the euro zone if necessary and more than two-thirds oppose handing Athens billions of euros in credit, a poll published on Sunday showed.

Next election is in 3 years. Government won't give a shit about the voters' opinion for the next 24 months minimum.

There are more important domestic issues currently, such as the German Supreme Court declaring the methods of the domestic social benefits system unconstitutional (because they didn't calculate needs individually enough).
Besides, Emnid? For the Springer press? Can't get more tabloid, or much more national-minded-conservative really (ok, so they could have gotten Allensbach to do it...).

Originally Posted by tankie

However Rogoff, a former International Monetary Fund chief economist, said helping Greece was unavoidable.

... the IMF is just cranky that the EU won't let them operate in Eurozone states. Not now, not ever.