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Guest Charlie The Tramp

Spain Rues The Day It Joined The Euro

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Guest Charlie The Tramp
The numpties at the Banco de Espana must be rueing the day they joined the euro. They have three reasons for regret. The country’s housing bubble has burst, the economy is less competitive than ever and the current account deficit has mushroomed to the world's second largest.

And there’s little to nothing they can do about it. Except, of course, look on helplessly...

It didn’t have to be like this. Before euro membership, the Spanish economy was motoring on nicely. Economic growth at just over 3% was complemented by interest rates at 15% and almost normal levels of household debt. Then came the euro, and with it interest rates set across the board by the European Central Bank.

How many more countries in the Euro will rue the day they joined when their housing bubbles burst. I like the mention of 15% IRs when everything in Spain was almost at normal levels.

Thank gawd we did not join, it would have made Irish HPI look like a walk in the park. :D

Spain rues the day it joined the euro from Moneyweek

Reading the whole article is a must.

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How many more countries in the Euro will rue the day they joined when their housing bubbles burst. I like the mention of 15% IRs when everything in Spain was almost at normal levels.

Thank gawd we did not join, it would have made Irish HPI look like a walk in the park. :D

Spain rues the day it joined the euro from Moneyweek

...ermmm

Interest rates promptly dropped below 3%, and before Spain knew it, its economy turned red hot. Cheap money flooded the market, which in turn stoked a housing bubble. Spanish house prices have jumped 270% in just a decade. Spaniards suddenly found themselves riding a housing beast that could lose control at anytime.

Sounds just like the UK, but with more sun.. :P

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How many more countries in the Euro will rue the day they joined when their housing bubbles burst. I like the mention of 15% IRs when everything in Spain was almost at normal levels.

Yeah, but think how much they save on commission fees converting money when they go on holiday.

(That seems to be the only reason anyone I know has for wanting Britain to join the Euro)

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Surely they smiled a little when mandelson turned up hes a top bloke that lad

never done f*ck all wrong in his life!

Pillar of the comunity!

And deffinately never got sacked for being a tw@t.....................twice neither :)

The EU is nothing but an expensive joke!!!

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Guest Charlie The Tramp
Yeah, but think how much they save on commission fees converting money when they go on holiday.

(That seems to be the only reason anyone I know has for wanting Britain to join the Euro)

Or putting all their spare foreign change in the Aircraft Charity Box on the return flight. ;)

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How many more countries in the Euro will rue the day they joined when their housing bubbles burst. I like the mention of 15% IRs when everything in Spain was almost at normal levels.

Thank gawd we did not join, it would have made Irish HPI look like a walk in the park. :D

Spain rues the day it joined the euro from Moneyweek

I don't think Spain's woes have anything to do with joining the euro. The house price bubble was of their own making as it was their primary method of attracting foreign investment into the country. They do have a serious current account deficit, but so do Portugal and Greece, so they are not unique in that regard. All 3 come from the second tier of the EU's economic elite and for many years were the EU's emerging economies and not established ones.

By the way their GDP was 4.1% in quarter one, well above that of the other major economies in Europe.

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throw in our misguided switch to CPI and I suppose there's a good anti-Euro angle to be had on all this. Will the global credit bubble destroy the Euro?

The credit bubble seems to stem from the Anglo-Saxon countries, but it has wreaked havoc on the rest of Europe due to the artificial uniformity of IRs there.

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throw in our misguided switch to CPI and I suppose there's a good anti-Euro angle to be had on all this. Will the global credit bubble destroy the Euro?

Not until after the Euro has destroyed the US dollar, IMHO.

The credit bubble seems to stem from the Anglo-Saxon countries, but it has wreaked havoc on the rest of Europe due to the artificial uniformity of IRs there.

I'm not so sure. Much of the damage has come from the Yen carry trade.

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Much of the damage has come from the Yen carry trade.

very true. But which group of greedy guts had the biggest appetites for all that lovely cheap money?

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economy is less competitive than ever and the current account deficit has mushroomed to the world's second largest

no spains economy is still doing well, current account deficit is way lower than the UK, this is all a bit of hype, infact spain gain a lot from its membership into the SEA via a hugh amount of funding. the problem is all the lending its done over teh past few years to spanish companies taking over foreign companies.

Edited by crash2006

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no spains economy is still doing well, current account deficit is way lower than the UK

Spain's current account deficit is 9.5% of GDP, way higher than the UK. The US is 5.7% and UK ~3.4%

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Spain's current account deficit is 9.5% of GDP, way higher than the UK. The US is 5.7% and UK ~3.4%

they are exporting more than what they are importing, the issue is spanish companies borrowing money to buy foreign companies thats problem, its a short term problem. Infact it more of a problem for the UK as spanish companes have been buying up uk companies, if the crap does hit the fan or if they need to repay the loans asap they could reduce the work force in the uk, increase productivity, increase prices.

Edited by crash2006

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our account deficit has been kept low because of foreign buy british companies, when this all stops our will grow at a fast rate, ie our is short term good but long term bad.

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All that cheap money used to build buildings and infrastructure with - much better to waste a boom on a good old fashioned British planning enquiry......

......they must feel really gutted in Spain.

Not.

btp

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Guest Charlie The Tramp
This type of problem has long been predicted. How long will the Euro last?

More of how long will the EU last.

History shows us that eventually all Empires collapse into obscurity and become past History. ;)

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The Fed, Euro Central Bank and the BoE have all, more or less, moved in unision during the credit bubble. If the Banco de Espana had remained 'independent', chances are it would still have stoked a massive credit boom.

These days no major Central bank is going to say, 'Y'know, let's have a tight monetary policy and be open and honest about inflation and, hey, while we're at it, let's require banks to hold bigger reserves'.

They're all reading from the same page.

Edited by CrashedOutAndBurned

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Why doesn't spain just leave the euro? Surely this is simple enough to do.

1. Spain has done very well out of joining the EU going from near third world to first world in less than 20 years.

2. Spain still receives large cash transfers from the EU for regional aid and through CAP.

3. For Spaniards the EU marks a very important psychological shift back to European 'civilisation' after forty years fascist isolation under Franco.

4. Spaniards have a huge distrust of their own politicians who they see as very corrupt and self serving. They quite like an EU that forces transparency and accountability on their own politicians, not least with regard to economic policy.

5. Spaniards are acutely aware that they have neither a strong industrial or technology base for their economy, and remain very dependent on tourism from other Europeans, selling mid range manufactures to other Europeans, and investment by other Europeans in manufacturing in Spain.

For all these reasons support for the EU remains very strong in Spain, and they are likely to bite the bullet and accept a few years hard times as the economy deflates and Spanish wages become competitive again.

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The economist did an article on leaving the Euro, sadly it's premium content but here's the link.

I read that issue but don't remember the details--basically it was about who would end up owing what in terms of debt/bond obligations as far as I can recall, and there may have been a hint that it could spark serious hostility. I wish I still had the magazine.

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