Tuesday, Jan 20, 2009
Ten years of euro membership have lured Spain into a terrible trap
telegraph: The euro is torture instrument for Spain
S&P did not say explicitly that EMU has become an instrument of debt-deflation torture for Spain. That would be breaking the great euro taboo. It insisted that EMU provides an anchor of stability. But that is pro-forma dressing. The sub-text is that Spain cannot recover until it breaks its chains.
Posted by chris @ 09:10 AM (988 views) Add Comment
5 Comments
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1. plato said...
Excellent article. Spain does not have the necessary control over its economy and cannot regenerate to maintain the living standards that have been 'miraculously' acheived. IMHO can see a two tier system in Europe emerging or disintergration occurring.
2. A said...
This article does not provide any justification for its violent anti-euro accusations. How can anyone believe that controlling the rates of a national bank would affect the debt owned to other banks? Ridiculous. And the BCE does not set rates "according to German needs" only. How ignorant can you get.
3. goweresque said...
This is the exact reason why anyone with a brain could see the Euro was a terrible idea for countries with such divergent economies (and cultures) as Spain and Germany. Someone would eventually be out of step with the other and massive problems would develop. We are lucky we had the 91/92 ERM debacle that showed us the folly of fixing your exchange and interest rates outside of political control. We would be in the same situation as Spain if we had joined the Euro at its inception. Imagine the how big our property bubble would have been at Euro interest rates for the best part of 10 years! At least we can reduce our rates to zero, and lower our exchange rate to help cushion the blow. Spain has no control at all, other than to reduce its spending and wages in the teeth of a recession/depression. They will suffer terribly and (eventually) leave the Euro. As will the Irish and Greeks. Portugal would leave with Spain I expect. Italy may manage to hang on in there (why they'd want to, I don't know!).
4. Foo said...
so S&P says that the EMU / Euro is an anchor of stability, and the torygraph says that they really meant was that "Spain cannot recover until it breaks its chains." ?
is that really what an "anchor of stability" means? Meanwhile, here in britain, we're enjoying the 27% devaluation of the pound
http://www.ft.com/cms/s/0/6fc5f40c-e668-11dd-8e4f-0000779fd2ac.html
http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/01/faith_in_banks.html
'In the context of how others see us, here are remarks made overnight by Jim Rogers, the well-known investor, to Bloomberg: "I would urge you to sell any sterling you might have...It's finished. I hate to say it, but I would not put any money in the UK." '
5. Lars The Kraut said...
finally germany has reached it ultimate goal. The devaluation of the euro resulting from the crumbling economies in the south with support the german export machine, while our main competitors, Japan and Switzerland suffer increasingly from appreciating currencies. Since Britan and the US were so wise as to destroy thier own manufacturing industries over the last couple of decade the world will have little alternative but to purchase its technologie in GOOG OLD GERMANY! - thankyou for coming