Monday, November 21, 2011

Wait and see

Bill writes:
I know it is not talked about it 'polite' circles (think of the man in the Bateman cartoons), but unless he really does have some magic aces up his sleeve, the solution for Spain is to disentangle itself from the Euro, to allow its resurrected Peseta to devalue and to regain the competitive advantage it has lost since the Euro was created. This is not of course a pain-free solution, indeed it would be extremely onerous, but it is the certain way to allow Spain to grow again in the medium-/long-term. Trying to maintain the same interest rate regime as Germany is never going to work for Spain (or Italy or Greece and a number of others).
Is there the political appetite for this, though?

I had read an article in the newspapers a few days ago along the same lines. A return to a devalued Peseta would be a bold move for Spain that would reduce the spending power of every Spaniard. I wonder if the newly elected President has this in mind, we will have to wait and see.

Even if, Mariano Rajoy does not take this bold step, he will have to bring in further austerity measures to try and achieve a similar result. Estimates say that he will need to find 18bn Euros of extra savings through cuts or tax rises. Rajoy says that he wants Spain to become part of the solution rather than the problem for Europe. That to me would indicate that he has no intention of leaving the Eurozone. 

One thing is clear this morning, Spaniards have lost their taste for socialism. A 16% lead gave the PP 186 out of the 350 seats in government.

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