Has the euro experiment in Spain failed?

 

SPAIN joined the EEC in 1986 and became a member of the eurozone in 1992.

Now, 10 years later, one might consider what the advent of the Euro has meant to ordinary citizens. This newspaper reported last week that everyday necessities, food, clothing, a roof over one’s head, have risen in price 48 per cent overall as a result, direct or indirect, of the euro.

Salaries of course, have not kept up, leaving every household poorer than in 2002. The world financial turmoil hasn’t helped, but Spain has fared worse than some because too much of its economy was based upon two interdependent activities, tourism and construction.

That was faulty economic thinking by governments, both the socialist PSOE and conservative PP, but might have been gradually corrected if it hadn’t been for the early financial contributions from the EEC which masked the underlying problem.

So, not only did the euro allow the politicians to keep their heads firmly planted in the sand, but as prices rose in response to EU regulations designed to force every economy to operate on a ‘level playing field’ (a much-loved bureaucratic phrase), so Spain began to find its share of the package holiday trade falling.

Tourists from northern Europe started to compare costs, and concluded that Turkey and Egypt presented better value for money than did Spain, Portugal or Greece.

Should Spain leave the euro? Well, it’s something that ought to be considered, but of course, there’ll be no thinking along those lines while both main political parties continue to believe there’s no survival outside the eurozone – despite the fact that pre-2002 Spain was doing very nicely thank you.

Seceding, even in an orderly, planned manner, would not be easy. A new currency (pesetas or whatever) would, in the short term, result in a quite profound recession, but give the international markets a few months to settle upon a true value, and the economy would begin its climb out of the abyss.

When one studies the papers or the television news, it appears obvious that the European countries faring worst from the world’s financial crisis are those on the periphery of the eurozone, those with the weakest, and perhaps too-specialised, economies – Spain, Greece, and Portugal. Italy has some industrial muscle situated in the north, but without that, the south and south-central regions would be as economically destitute as Greece, or perhaps even worse. Ireland on the other hand, although the recipient of an earlier bail-out, remains, for all its turbulent history, economically linked to a Britain which would not allow it to go under.

Of course, this would not mean a ‘two-speed’ eurozone, but one consisting of Germany, France, and perhaps the Netherlands. Belgium, although as much a victim of financial turmoil as the ‘peripherals’, could not easily be given up by the EU – not with Brussels earmarked as the eventual Federal Capital.

Perhaps it’s time for Spain to have a new political party – Partido Indepentista de España, (PIE) – set up with the aim of extracting the nation from the straitjacket of the single currency. After all, according to many economists and financial correspondents, the euro, being a politically-inspired monetary experiment, never had a chance of succeeding. How could it, when the EU puts politics above everything else?

Photo credit: Julen Landa

 

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