EllisG

http://www.bbc.co.uk/news/business-15734280

at the end of this article it mentions the possibility of the peseta and personal debt reduction. I'm no financial expert but does anyone know what exactly would happen to mortgages in Spain ? Would they convert them to pesetas and then devalue the peseta (therefore devaluing the loan value relative to other currencies)

jojojojojo

In the almost impossible and unlikely event of that happening, I think mortgage repayments would have to equate to the global market, because banks play in the global market. So you'll probably find that your mortgage would have to continue to be paid in euros - which could be a toughy if you get paid in pesatas as the pesata would be probably be so devalued that you and Spain wouldnt be able to afford a cup of coffee, let alone pay mortgages, debts etc

Jo xx

EllisG

think you are placing me the wrong end of the stick. The reason I was asking was because I would be very interested in taking a bank up on it's current 100% offering if they would be devalued with their currency.

I do like the "almost impossible and unlikely event" comment...just one look at the shrugging Sarkozy on the news 10 minutes ago moaning at Cameron's lack of agreement and his refusal to accept a 2 speed Europe actually makes me believe it is more possible and likely than ever. They are like headless chickens trying to save their always doomed political experiment of a single currency. Never mind coffee if the Euro is broken up and Spain is devalued I will be dancing in the streets with a big bottle of champagne

HBG

If the Euro fails there will be something like a 10% reduction in GDP all over the world. We will all be in a depression, possibly worse than the thirties.

And all the expats all over the world will be repatriated, and as soon as it can be arranged.

amideislas

Not likely. Spain is one the "good guys" with respect to living beyond its means - Spain didn't spend itself into oblivion. Its a victim of its housing boom and bust, and public wages & benefits in Spain are much too high (result of years of socialist govt). Otherwise Spain has been pretty responsible by comparison to the others.

If, like all other central banks, the European Central Bank were to implement "Quantative Easing" (or more simply put, "printing money"), then this would cause the value of the Euro to decline, which would in turn cause Euro debt to decline, lower the cost of labour, and make the Euro a lot more competitive. The markets would rally, the overall economy would grow, but economic powers like Germany would suffer from inflation.

Merkel is against QE because it would only serve to help Greece, Italy, Spain, Portugal, and all other member states living beyond their means, and would cause pain for Germany.

So, if QE isn't an option then the only other option is to break up the Euro or kick out members that are living beyond their means (which, in reality, is most every member of the Eurozone).

But at the end of the day, the ECB will have to start printing money soon. It's really the only way out. Like it or not.

billgates

Why will brits be repatriated?

HBG

During a depression, of necessity, nationalism reigns, call it national socialism if you like. Countries close their borders and kick out the foreigners, and other groups who are deemed to pose a threat during such hysterical times.

The threat of war increases and a look at quite recent history books show that the UK and Spain have a bad record as regards national friendship.

Mitzyboy

Its no use telling people this HBG. I tried to point out the implications before and people just ignored it.

Cameron is blamed this morning for the break up of talks. If they don't sort something then we are going to see some horrible results in relation to Pension funds etc when the markets start to quake in their boots again. Who will be the bad man of Europe then?

jojojojojo

The banks wouldnt revert back to their currency if the pesata were to return. They're international and the chances are so would any mortgage repayments be. So earning in pesatas and paying a mortgage in "the euro" or whatever other currency the international world chose to use would be virtually impossible and therefore wouldnt work. Think about it. Without exception, all banks are international. they are financed by the IMF. They could hardly allow themselves to be in a position of running a currency that isnt worth anything - it would be like them lending and spending monopoly money! How would they compete!

Sorry, I know what you're saying, but that cant and wont happen - the opposite is far more likely. Then there will be trouble

Jo xxx

EllisG

trouble is an understatement...time to complete that move to Gibraltar me thinks

anonimouse

If it ever happens you can bet your bottom dollar it will cost us heavily

JLFS

I cant see that happening,and dont see why they would be repatriated, if the uk government made it impossible for folks to draw their pensions in whichever country they live, it might makea lot return home, but that would be about it.

But if the worst comes to the worst the repatriated could always check into a hotel in Benidrom for a few months in winter.

JLFS

Do you mean if they return to the peseta?........too right.

Countryboy1

Yes there would of course be downsides for Spain but surely a devalued peseta would immediately make Spanish property and new home building very attractive as regards other currency countries and also tourism and this be a shot in the arm for these 2 sections of the economy. Also, exports from Spain would be more attractive to the rest of the world.
Disadvantages of course, but surely some positives?

amideislas

Devaluing the Euro would greatly benefit Europe as a whole. Wipe out billions of sovereign and personal debt, reduce the cost of labour (Spain has among the largest and highest paid public sectors in Europe), make European products cheaper and more competitive compared to the rest of the world. The Euro is terribly overvalued now. It need to be devalued - by printing more of it, like everyone else does.

The rest of the world routinely devalues its currency whenever there's a crisis (e.g., US, UK, China). Before the Euro, Greece could have simply devalued the Drachma, and problem greatly reduced or (basically) solved. Same with the Peseta, Lira, and any other currency.

Devaluing the Euro would, however, mean more pain for Germany (they would see much more inflation than in the rest of the Eurozone), and Merkel already has political pressure at home. Doesn't need to add fuel to the fire.

Spain, Italy, Greece, and Portugal already have huge inflation anyway - the result of austerity - it's more expensive to do business, so things just cost more.

So, the answer is to make a new treaty that forces the members to be fiscally responsible from now on?

Please. What about the mess we have now? Getting another agreement won't solve it. Print more money! The markets will rally and the economy will grow as a result, but the Germans won't much like it...