Euro blues

WILL the euro survive this recession? I ask this question because an increasingly large number of Spaniards are calling for the return of the peseta. They blame many of the country´s ills on the single currency. To some extent they are right. The Bank of Spain has little room to manouvre and has to follow instructions from the Central European Bank. What suits the German economy doesn´t necessarily suit Spain, or Greece or Italy.

Germany is moving clear of recession and therefore it can afford higher interest rates. Spain is still in recession and therefore it needs lower interest rates to stimulate growth. It is almost unthinkable that Spain would return to the peseta but some members of the tourist industry think it would be a good idea. For the British, Spain has become far too expensives. In bygone days the Bank of Spain would simply devalue the currency and everyone would be happy. But with the euro it is a different matter. Sooner or later Greece will be ejected from the euro because it has become a liability which threatens the very future of the single currency. Who will follow?

Well, we will have to wait and see but if one goes others could easily follow. The single currency was a nice idea and in happier times it could very well have worked. But in these hard economic times I believe that we will see a new stronger euro emerging with fewer members and similar economies.