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E C B Extremely Accomodative I R Are Hurting Spain

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http://thebusinessonline.com/Stories.aspx?...2E-D07EB5AA1CEE

Club Med economies face meltdown with euro zone

By Allister Heath
03 September 2006
SPAIN and Italy are on a collision course with the rest of the euro zone because of their soaring current account deficits and excessive wage growth, a top consultancy will warn on Monday. The two “Club Med” economies have been crippled by the euro zone’s one-size-fits-all exchange rate and are facing meltdown, Lombard Street Research’s report will say.
The surging debt and artificially low euro interest rates that have kept Italy and Spain afloat are likely to come to an end, threatening to force Italy to quit the euro and prompting a house price crash in Spain.
The report adds that huge pay rises combined with weak productivity growth have destroyed the two economies’ competitiveness.

Could the Euro eventually tear the Eurozone apart due to regional variances and different fiscal needs? Ireland has suffered several years of punishing HPI as a result of lax rates which have been necessary to re-start Germany after the post-Cold War integration problems.

Looks like Spain may literally explode under the pressure of the IR bubble.

5 years from now the Euro may cease to exist IMO.

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Guest wrongmove

Could the Euro eventually tear the Eurozone apart due to regional variances and different fiscal needs? Ireland has suffered several years of punishing HPI as a result of lax rates which have been necessary to re-start Germany after the post-Cold War integration problems.

Looks like Spain may literally explode under the pressure of the IR bubble.

5 years from now the Euro may cease to exist IMO.

literally explode !? :unsure::)

I agree with the rest. Could you imagine 2% IRs here (3% now) ? Look at Ireland, I guess.....

Edited to add:

Betfair have only matched about £200 for the ECB October decision so the odds are still a bit volatile, but it looks like about 1/10 on a rise.

Edited by wrongmove

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The whole idea of one rate for many economies was barmy from inception. It defies belief anyone signed up for the euro, look at the mess its made of property markets.

Edited by simon99

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It defies belief anyone signed up for the euro, look at the mess its made of property markets.

Yeah, but think of all the money you save not having to convert currency when you go on holiday.

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http://thebusinessonline.com/Stories.aspx?...2E-D07EB5AA1CEE

Club Med economies face meltdown with euro zone

By Allister Heath
03 September 2006
SPAIN and Italy are on a collision course with the rest of the euro zone because of their soaring current account deficits and excessive wage growth, a top consultancy will warn on Monday. The two “Club Med” economies have been crippled by the euro zone’s one-size-fits-all exchange rate and are facing meltdown, Lombard Street Research’s report will say.
The surging debt and artificially low euro interest rates that have kept Italy and Spain afloat are likely to come to an end, threatening to force Italy to quit the euro and prompting a house price crash in Spain.
"Excessive wage growth"? A few years back I told a spanish friend working in a graduate role for a publishing company that I was really badly paid, only around E18k. She thought this some kind of kings ransom. Everyone young seems to be on impossible social housing waiting lists.
Meanwhile housing prices in and around madrid are not a million miles from London prices. They'd better get some pretty darned excessive wage growth.

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The whole idea of one rate for many economies was barmy from inception. It defies belief anyone signed up for the euro, look at the mess its made of property markets.

I wouldn't say its a barmy idea, just how well its executed.

America is made up of many states (which collectively account for 30% of the worlds GDP), they have their own state governance and economies which seem to have managed well enough with one federal interest rate.

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I wouldn't say its a barmy idea, just how well its executed.

America is made up of many states (which collectively account for 30% of the worlds GDP), they have their own state governance and economies which seem to have managed well enough with one federal interest rate.

I occasionally fall foul of the doom mongers but RB takes the biscuit! Tell us all which currency has risen to be one of two preferred reserve currencies and which currency did Korea, China and a bunch of other folks buy in the billions last month? The Euro of course which most americans now see as a threat to dollar hegemony. The USA has 52 very diverse states with staggering differences in wealth and prosperity. Massachusetts is as far cry from Alabama and the disparity is far wider than say Italy and France. The Italians bought the idea of EU integration and will just have to cut their cloth accordingly. Those predicting the collapse of the EU are most likely Little Britain ideologues who still think Britain rules the waves. Face it, integration is coming and makes sense. Those who disagree can tell us how it makes sense for us to peg our economy to the dollar!

Edited by bpw

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The whole idea of one rate for many economies was barmy from inception. It defies belief anyone signed up for the euro, look at the mess its made of property markets.

And by sticking with the pound we have a completely sensible property market. :huh::blink:

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Does anyone subscribe to the Wall Street Journal?

SESENA, Spain -- Half-completed skeletons of more than 100 apartment blocks here are a portent for one of Europe's hottest property markets.

Built to house 40,000 in a town of 6,000 residents near Madrid, the ongoing project illustrates a building boom that outstrips the needs of Spanish home buyers.

"There's clearly not enough demand for all the homes being built," said Seseña Mayor Manuel Fuentes, whose complaint over irregularities has led to a government probe. "Many are never used; people buy them to speculate."

Other projects are also under investigation. In glitzy beach spot Marbella in southern Spain, a former ...

Can´t read rest as am not a subscriber. Does anyone have access to th rest?

800,000 new homes were started in 2005. Spain needs around 300,000 new properties a year. So record high prices and a glut of new builds.

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America is made up of many states (which collectively account for 30% of the worlds GDP), they have their own state governance and economies which seem to have managed well enough with one federal interest rate.

LOL. Yeah, that's why some parts of the country are rotting ex-industrial cities where there are few jobs outside government while the average house in California is somewhere around $500,000... 'one rate fits all' policies can never work on that scale.

Then again, if they'd stuck with gold-backed money then most of these problems would never have happened.

And by sticking with the pound we have a completely sensible property market.

Imagine how high prices would be with 3% interest rates.

Edited by MarkG

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The Italians bought the idea of EU integration and will just have to cut their cloth accordingly.

I've heard that the Italians bought it because they feel that they can trust Brussels far more than they can their own politicians. I can identify with that.

Italy has very strong regional identities and local government has a lot more power in running local economies than is the case in the UK. The exceptions are the regions run by the mafia, and of course their south/north divide is legendary. Thus economic government of the country at a national level doesn't make much sense to most Italians.

I recently met a young guy from Umbria, who told me about the local shortage of decent employment opportunities and unaffordability of housing in the cities, which is generally much worse than in the UK, though in small towns in rural areas within commuting distance of the cities affordability is better than in the UK. When I asked him about job opportunities in Tuscany, the region which borders Umbria, he answered 'I don't know' very dismissively, with an expression which indicated 'how should I know, and why should I care?'.

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Does anyone subscribe to the Wall Street Journal?

SESENA, Spain -- Half-completed skeletons of more than 100 apartment blocks here are a portent for one of Europe's hottest property markets.

Built to house 40,000 in a town of 6,000 residents near Madrid, the ongoing project illustrates a building boom that outstrips the needs of Spanish home buyers.

"There's clearly not enough demand for all the homes being built," said Seseña Mayor Manuel Fuentes, whose complaint over irregularities has led to a government probe. "Many are never used; people buy them to speculate."

Other projects are also under investigation. In glitzy beach spot Marbella in southern Spain, a former ...

Can´t read rest as am not a subscriber. Does anyone have access to th rest?

800,000 new homes were started in 2005. Spain needs around 300,000 new properties a year. So record high prices and a glut of new builds.

I dont get this argument constantly put forward about Spain. Isn't it simple supply and demand. Surely developers will not carry on building if they cant sell?

Market forces surely drive this building work and it will stop as soon as a glut occurs and sales drop. As all of the developers go out of business building work will slow and there will then be a drop in new builds which will probably fall below the 300,000 needed properties per year. The glut will then be sucked up over this period and normal service will resume.

Isn't this simple economics. Of course during the point were supply outstrips demand by a certain amount prices will drop. This will depend on the area but I have a feeling that coastal areas will be fairly untouched whilst inland areas (1km + from sea) will be decimated.

Watch this space!!!

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With the all the poisons that have been lying in the mud about to hatch out it is easy to see how Great Crash 2 will be different from Great Crash 1. It will, as the IMF pointed out a couple of years or so ago, be a worldwide bust affecting all of the bubbles at approximately the same time. It defies the laws of economics for such insanity to go without a correction. Houses are just a worlwide tulip bulb market and the same economic rules will apply.

http://news.bbc.co.uk/1/hi/world/europe/4082610.stm

Last Updated: Friday, 10 June, 2005, 21:48 GMT 22:48 UK

Germany 'chokes' on the euro

By Ray Furlong
BBC News, Berlin
A recent cover of Stern magazine showed the German eagle, struggling for breath, with a euro coin stuck in its gullet.
The message was clear -the German economy was suffering because of Europe's single currency.

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I dont get this argument constantly put forward about Spain. Isn't it simple supply and demand. Surely developers will not carry on building if they cant sell?

Market forces surely drive this building work and it will stop as soon as a glut occurs and sales drop. As all of the developers go out of business building work will slow and there will then be a drop in new builds which will probably fall below the 300,000 needed properties per year. The glut will then be sucked up over this period and normal service will resume.

Isn't this simple economics. Of course during the point were supply outstrips demand by a certain amount prices will drop. This will depend on the area but I have a feeling that coastal areas will be fairly untouched whilst inland areas (1km + from sea) will be decimated.

Watch this space!!!

Wishful thinking from a coastal property owner because there is no such thing as "simple economics" in the real world.

Market forces alone have not driven this building boom - otherwise every house would be occupied. Huge EEC infrastructure projects plus euro interest rates have transformed Spain's economy, but not all for the good. Spain´s average wage has fallen during the last two years, not risen. And with EEC subsidies stopping completely and interest rates rising . . .

Nobody who has visited the coastal regions of Spain in the last five years can´t have missed the huge amount of building going on. Nearly all are aimed at foreign buyers who pay far more than local buyers for property. And to sell on they need to find another foreign buyer. There are 13% less foreign buyers this year compared to 2005.

During the last crash in Spain prices of coastal villas in some areas halved in less than a year. All those shiny new apartments could suffer a similar fate this time around.

Watch this space indeed.

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The whole idea of one rate for many economies was barmy from inception. It defies belief anyone signed up for the euro, look at the mess its made of property markets.

It was the most stupid thing I personally have ever seen done to developed economies and countries...

How can you have a standard interest rate across these countries??

I still think Germany, Spain and Italy should break and this might just save Ireland as they can then have their own interest rate and decrease it back to Zero to stop the forecoming crash.

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It was the most stupid thing I personally have ever seen done to developed economies and countries...

How can you have a standard interest rate across these countries??

I still think Germany, Spain and Italy should break and this might just save Ireland as they can then have their own interest rate and decrease it back to Zero to stop the forecoming crash.

I don't know much about economics (am learning a lot from reading this forum), but I agree with what you say about the standard interest rate - it also struck me as being bonkers at the time it was introduced.

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Having multiple currencies in Europe is madness.

On an English scale, imagine driving north of Cambridge and having to change your money from currency A into currency B, then entering Wales (with currency C) filling up your tank with petrol in Birmingham (currency D) and then entering Scotland – having to change all your money over again.

Imagine trying to do business in this environment?

Sure, having one currency set for the benefit of London devastated the manufacturing economies elsewhere in the UK. Setting up a Euro area on such a large scale was always going to cause huge problems.

<Searches for a good metaphor>

But hey, you don’t make an omelette without breaking a few eggs.

Look forward to a dynamic Europe with a strong international currency (PetroEuro anyone?) greater labour mobility and cut price retirement homes on the Costas. :ph34r:

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Look forward to a dynamic Europe with a strong international currency (PetroEuro anyone?) greater labour mobility and cut price retirement homes on the Costas

LOL.

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  • 338 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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