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PostWhy Does Spain Cling to the Euro? Hannan in the *Daily Telegraph* (Nigel Jones, -UK, 06/05/13 3:15 am)
In view of recent discussions on Spain, I thought this article from London's Daily Telegraph would interest Hispanophile WAISers. Its author is Daniel Hannan, a Peruvian-born Hispanophile Conservative MEP who is a strong anti-EU Tory.
In it he poses the question: why do Spaniards cling so tenaciously to the Euro--a currency which is wrecking their economy? His answer is political, since there can be no economic case for the basket-case currency: that older Spaniards fear a return to the isolation of the Franco years. But Hannan believes that the younger generation--that is those Spaniards now suffering 51% unemployment due to the Euro--will change this stubborn mindset. After all, it is their future which the Euro madness has destroyed. I found the piece very convincing. But have a read yourselves and see what you think.
The tenacity with which Mediterranean voters clutch at the euro, even as it drags them under, is bewildering. Across Southern Europe, the single currency has meant layoffs, tax rises, bankruptcies, emigration and despair. Most people know it: you won't find many Greeks, Spaniards, Cypriots or Portuguese who speak fondly of the single currency, or of the politicians who took them into it. Yet, oddly, you find even fewer who are prepared to contemplate alternatives.
The anomaly is greatest in Spain. In the other stricken states, there is at least some discussion of the triple-d option (default, decouple, devalue). Archbishop Chrysostomos II of Cyprus--who, unusually in the Orthodox Church, is elected, and thus has a semi-political office--said, last month, "the euro cannot last, and the best thing is to think about how to escape it."
In Greece, breakaway factions from both Left and Right now propose ditching the single currency and the austerity measures it demands. In Italy, Silvio Berlusconi's observation that the euro had made most people poorer triggered the Brussels putsch against him, and Beppe Grillo is demanding a referendum on exit.
In Portugal, the main political magazine last week declared on its cover "Vamos Sair do Euro"--we're going to leave the euro. Inside was an interview with Professor João Ferreira do Amaral, author of a new book called Why We Should Quit the Euro. His conclusion is backed, as Ambrose notes, by figures ranging from the Chief Justice of the Supreme Court to the Secretary-General of the Communist Party.
In Spain, however, the debate has yet to begin. With the exception of a few Trotskyists and anarchists, the entire political class is united in supporting the currency that has given their country four years of recession and the highest rate of youth unemployment in the developed world: 57.2 per cent.
Why are Spaniards gulping down great draughts of the venom that is sickening them? Before answering that question, I ought to declare an interest. You won't find a more convinced Hispanophile than me. I love Spain: its literature, its cuisine, its fiestas, its proud and rebarbative people. I am frequently moved to tears by flamenco, occasionally by jotas, and I know the words to an embarrassingly large number of pasodobles (most Spaniards, in my experience, are surprised to learn that there are words to pasodobles). I have spent happy times in 15 of the country's 17 regions, and have many Spanish friends. When I write about what is in that country's interest, I am thinking of those friends, not of some abstract economic model.
So let's put the question. Why do Spaniards, who are acutely sensitive to issues of sovereignty when it comes to their internal arguments about regional autonomy, put up with a monetary union that leaves them poorer and less free?
For a very few people, the case is economic. Some argue that, while joining the euro might have been a mistake, getting out now would be a worse one. Spain's euro-denominated debts would become proportionately heavier, worsening the country's fiscal outlook. The short answer to that objection is that the devaluation would have to be accompanied by a default--the tenth in Spain's history, so hardly unprecedented. The great thing about writing off debt, from a sound money point of view, is that no one will lend to a government in default: it is obliged to live within its means.
This is also the answer to that tiny number of free-market economists in Spain, of whom by far the cleverest and most eloquent is Jesús Huerta de Soto, who argue that the euro is the only reason that there are any spending cuts at all, and that without its discipline, Spain would return to inflation, devaluation and flabbiness. In fact, as the brilliant Austrian school economist Juan Ramón Rallo put in when we shared a stage in Madrid at the weekend, the euro is not some kind of substitute gold standard. Its value is manipulated, interest rates are determined politically. It is, in short, a top-down rather than bottom-up medium. Indeed, as Juan Ramón pointed out, the euro is in some regards worse than a national currency, from an Austrian point of view, because of its automatic bailout mechanism, Target Two, which rewards incontinence and punishes thrift.
For most Spaniards, though, the euro has never been about economics. It's about the status of the country as a cosmopolitan democracy. When British Euro-enthusiasts claim that the alternative to European integration is isolation, they sound idiotic. Britain has never been isolated, other than in the literal, geographical sense. But Spaniards of my age and above can remember what it meant to be outside the comity of nations. They know what it means to be poor, cut off, dependent on remittances. During the dark years, "Europe" was a shorthand for everything that a normal, modern country should enjoy: regular elections, foreign films, supermarkets, uncensored newspapers, miniskirts, religious pluralism.
Even now, many Spaniards struggle conceptually with the notion that "Europe" is a problem rather than a solution. They accept that the euro isn't working; but they hope for a different approach from Brussels that will somehow fix things. The blind-spot is largest for Spanish MEPs and Eurocrats. Because the EU has been very kind to them personally, they simply cannot understand that it is bad for their countrymen.
Indeed, pretty well the only Spaniards you will find who are prepared to criticise Euro-federalism are students, who don't carry the baggage of the Transition, and who can spot a racket when they see one. It was an immense pleasure to meet many of these younger, freedom-oriented Spaniards in Madrid at the weekend. In due course, their views will become mainstream--partly because of demographic change, mainly because of developments in the euro-zone. The question is how much of the Spanish economy will be salvageable by then.
JE comments: Hannan has put his finger on Spain's fondness for the euro: even if the currency is no longer seen as the guarantor of prosperity, it remains a symbol of cosmopolitan democracy. As recently as 1981, well within public memory, Spanish parliamentary democracy was a very fragile institution. Only the young more or less take it for granted, and they are the ones suffering the most under the current austerity. Might this be the generation that demands a change?
Why Does Spain Cling to the Euro?
(Henry Levin, USA
06/06/13 2:21 AM)
I thought Nigel Jones's piece (5 June) on the Spanish acceptance of the Euro was spot-on. It has always been the symbolic identify with cosmopolitanism (proof that Spain is no longer isolated) that we heard from many here when the Euro was adopted. Our friends would constantly crow with pride on having the Euro. But consider this. The Euro was adopted here in 1995, 18 years ago. Still, even today, car prices, home prices, and other expensive consumer goods (e.g. home appliances) are still listed in pesetas as well as euros in the advertising.
JE comments: Last night we dined out with a dozen Spanish colleagues of the AP/Cincinnati reading (Spaniards never socialize in small groups), and I brought up the question of the persistence of "peseta-mindedness." The answer: many Spaniards of the over-40 demographic still think in pesetas for small purchases, but cars, apartments and the like are conceptualized in euros only. Of course, in the old days, Spaniards really thought in "duros," the five-peseta coin that required foreigners to divide prices by five--i.e., a 100-peseta item was quoted as "20 duros." The "duro" now survives only in figures of speech, like the "bits" expression in the US. (Shave and a haircut--two bits.) Note that "bits" are also a holdover from the days when Spanish coinage was king.
- Why Does Spain Cling to the Euro? (Randy Black, USA 06/06/13 2:41 AM)
I generally stay out of currency discussions (see Nigel Jones, 5 June), mostly because I do not fully understand the process of currencies.
That said, a few years ago I predicted that the euro would not-could not last. My opinion was based on the nationalistic nature of the EU states. Personally, I miss the beauty of the individual currencies. Who has not marveled at the beauty of the 5 Franc denomination with its rendering of Pasteur? The euro seems so bland by artistic comparison.
All of this said, Nigel Jones stated, "there can be no economic case for the basket-case currency." My question: Why do the various EU members cling to the euro? Why is a Euro necessary at all? Why does the EU "need" a basket currency?
JE comments: The best arguments in favor of the euro are to facilitate intra-EU trade, and to provide a currency of sufficient weight to counter the dollar. Yet the euro cannot be defended on aesthetic grounds. This life-long numismatist misses the days of colorful national banknotes throughout Europe, with their depictions of artists, scientists and national heroes. Ho-hum for the euro's "gate and bridge" approach. Compromise is often boring.
- The Euro (John Heelan, -UK 06/06/13 3:27 AM)
My countryman (and friend) Nigel Jones and I rarely agree on political matters, but his reasoning (5 June) about the validity of the euro and the motivation behind its adoption makes sense. I have always puzzled how a currency can be supported without a cohesive economic and trading policy. In my humble opinion, attempting to do that with 27 countries is akin to trying to herd cats. Even within the eurozone the cost of a standard product (1 litre of unleaded gasoline) ranges from 1.28 euros to 1.78 euros.
Then there is the underlying motivation for having a European currency. Nigel's claim that it is a merely ploy to force closer political and economic integration (leading to fusion) is supported by France's President Hollande's recent statement that the eurozone should have its own "economic government... its own budget, the right to issue debt, a harmonised tax system and a full-time president."
From a personal perspective, having constantly had to travel to European countries I welcomed that the euro released me from carrying bags of different currencies on multi-country trips and constantly having to recalculate expenditure.
JE comments: A full-time eurozone president? Imagine the expense and bloated bureaucracy it would bring.
- Why Does Spain Cling to the Euro? (Randy Black, USA 06/06/13 2:41 AM)