Frightened to ask really??

As a comparativley ignorant person with regard to investments, shares, stock exchange showings, etc., etc., I wondered what the outcome would be for someone like myself, who has selected the beautiful country of Spain, in which to spend their retirement days, if the Euro took a nosedive!!

I am totally committed to this country. I am a tax payer here. What little funds I had have been invested here.

Does this mean that if the Euro dies, those who are totally "Spanishised", will be penniless, or will the Euro funds be converted back to Pesetas??

All I wanted to do, was enjoy whatever somewhat poor health and lifestyle would permit, without too much worry and panic!! I had enough of that in my 49 years in the graphic arts world!! Exciting, but it took its toll!!

Any knowledgeable replies would be gratefully received. Thank you.

I shouldn't worry (famous last words) ....  I don't think (imho) the Euro can be allowed to fail, so pesetas will not be an issue.

If (a very big IF, which i do not think will happen) Greece do get kicked out of the Euro then their currency demise against Europe and the rest of the world will be a wake up call for all the rest to get their house in order and to not follow the same way.

But, if the worst happens (which i still do not think will happen), then as you live in Spain then whatever happens the local effect should not really bother you as whatever currency you have, be it Euros, pesetas (no way can i see this happening) or Kougarans or whatever, it will still be proportionatly worth the same amount in the local supermarket so the cash in your pocket will still buy the same.  It would only be a problem for you if you were going out of the country for a holiday or something and if the Spanish currency had suffered a hit against your destination.  Again, this has not happened and Germany and France and the IMF (and the UK) will do there upmost to ensure this does not happen.

Again, imho, i think Spain in the Euro is a good thing and will stabilise the local economy instead of it going into freefall which could happen to Greece.

Hope my ramblings help!

I think we'll all know a bit more later today, but my humble uneducated opinion differs from TP1. 

As I understand it the crux of the issue is that most of leading world economies have been spending beyond their means for too long.  The current world wide recession has had an adverse effect on taxes and revenues received by governments where Greece has been singled out as one of the worst culprits.  They've been living beyond their means and the fact that they are part of the eurozone means they cannot devalue their currency or print money as they would have done previously to get out of the mess they are in.

The situation with Greece is clearly unsustainable if they are simply booted out as suggested there will be some major repercussions on those who have kept them afloat.  Including another major banking problem - I've read that the French banks would sustain massive losses if the Greeks default on their loans.  Also, you get the impression that the European bureaucrats want to maintain their status which means they want their empire to be kept intact.

They must surely agree to changes that will hold good on a long term basis - they've been saying it'll all be OK for far too long and the longer they delay action the worse will be the effect of whatever transition is agreed.

There has been brief mention of a "southern" Euro currency for Spain, Italy, Portugal, Greece and Ireland that will be allowed to float at a lower level than the Euro, but somehow work in parallel.  The mechanics of this are way beyond me but it may mean that in the short term the Spanish exchange rate with the pound would revert to something closer to what it was 5 years ago rather than almost parity as it is now.

If this happens it'll make exports cheaper and imports more expensive which is not necessarily bad news.  Spanish property prices would become cheaper which might itself provide a vital boost to the economy - of course the downside is that those that sell and convert the monies into UK pounds would be worse off.

On the basis that even Angela Merkel and those that will make the decisions do not seem sure and certainly do not agree on the best remedial action I reckon we're all entitled to guess.  But for me they cannot keep pretending that this "one size fits all" Euro is a long term proposition - the Euro must break up and surely this has to be the sooner the better, before the problem gets even more out of control.

I'm not sure what any individual can do to protect yourself.  My bank current account in Spain usually has a low balance, but for sure I'll not be looking to change that until whatever fireworks there are have taken place.  It might be argued that if you can sell a Spanish property rapidly you should do - but in a way I'm glad that that the possibility is not realistic.   As at the end of the day I love the place we've got anyway.

I look forward to hearing the thoughts of others with more beautiful minds than mine.

Thank you to both TP1 and acer for their views on the situation. Very informative.

Both make very good sense!! One question I ask myself is, what actually Greece does, if anything to contribute to the Euro economy?

If you talk about Germany today, not Germany many years ago, who also had to be bailed out, mainly by the USA, I believe, they are second to none in engineering quality, order books are bulging, etc., etc.

I once bought a pair of Summer light shoes, made in Greece, while on holiday there but wonder, apart from tourism, what they "put in?"

I do not wish to be rude or insulting but I wonder what went wrong?

Does this mean that if the Euro dies, those who are totally "Spanishised", will be penniless, or will the Euro funds be converted back to Pesetas??

They'd be converted to worthless pesetas.  At that point, I may be tempted to buy a cheap Spanish property.

You will be lucky   dream on.

You will be lucky   dream on.

We'll see... 

It's going to be an interesting decade coming up for Spain...

As has been suggested, your Euro bank deposits held within Spain and any Spanish assets (eg property) would be converted into the new currency - new pesetas - which would then drop dramatically in value against both the Euro and Sterling in the very first moments of trading.

If this scenario becomes likely, or even heavily rumoured, emergency currency controls and asset transfer restrictions would need to be imposed to prevent the inevitable run on the banks (the logical action to take if you believe this is likely is to transfer your Euros out of Spain so they don't get converted and devalued - but if people follow that course, the banks, and the economy, would collapse entirely).

All of which said: such a disastrous situation is probably unlikely (note my confident and definitive tone!) simply because it would be such a painful and unpopular process to go through that politicians will do almost anything to avoid it. It might happen in Greece, simply because the economy there is in such a dire situation anyway. Thankfully Spain, whilst it has serious problems, is nowhere near so bad.

I've lived in coutries where the currencies have collapsed and the economies have been devastated. Funnily enough, things go on much as before. Even if, for example, Spain were to issue new Pestas at par with the Euro, and even if this currency were to devalue 100 times overnight on the markets, you still wouldn't be able to buy a SEAT car, or a house, for pennies in Euro-equivalence, because automatically the devalued currency would inflate prices....and a car or house would cost much the same as before in real terms. That's not to say there won't be bargains around, but Spanish hotels won't be charging the equivalent of 5 Euros a night just because the local exchange rate has crashed. And beachside apartments won't be going for 10k Euros - you'll be happy to know!

What you say, Guy, makes a lot of sense.

Patricia

There's as much chance of Greece, or anyone else, being kicked out of the euro as there is of Ohio being kicked out of the US dollar.  Not going to happen.  The momentum is towards greater European integration not less.  And the single currency was a landmark step.  Politicians are too committed to it.   And one of the main arguments in favour of a single currency is that it would protect weaker economies by giving them more muscular partners.  Talk of the new peseta is just wishful thinking on the part of the right wing Europhobes in the UK.

Remember five years ago when your pound bought you €1.50.  It is sterling that has weakened since then - not the euro.  The euro is stronger now.  The result is that Spain and other euro zone country products are dearer to UK purchasers while the euro buys you more British goods for the same money than it did before - which is why you can't sell the villa you bought five years ago.  Unless, of course, it's to another Spaniard or someone whose income is wholly in euros and not subject to international exchange rates.  Because, as others have pointed out, exchange rate movements only affect the prices of goods traded across currencies.  Same currency transactions are not affected.

It's certainly true that politicians do not want Greece to leave the Euro.

It's also true that politicians did not want Greece to default.

It's just been announced that Greece will default.

I'd agree that Greece leaving the Euro is highly unlikely, that Europe's politicians would go to almost (*almost*) any lengths to avoid it, but we deceive oursleves if we imagine that politicians are completely in control of events. It's wise to be prepared for occasional Black Swan events.

Of course politicians don´t want to leave the EU, it´s their bread and butter. The whole thing makes me want to weep. Who elected Barroso, Van Rompuy, Lagarde etc? The European Commission hasn´t had its accounts signed off in 15 years! It´s a black hole. The new EU building cost well over quarter of a billion euros at a time when public sector wages are being slashed and countries are being asked to introduce harsh austerity measures.

I spoke to several Spaniards today who thought the second bail out for Greece was great news. What? Spain has to fund itself on the international bond markets paying over 6% interest on its 10 year notes, whilst Greece (where retirement at 50 is par for the course and tax evasion is the national sport) defaults and now gets loans from the European Financial Stability Facility at 3,5% (Spain as the 4th largest economy has to contribute to the EFSF) it is pure insanity. 

Now the Spanish tax payer is also bailing out CAM, 3 billion euros! My region (Castilla La Mancha) is in debt to the tune of 8 billion euros, whilst the ex PSOE governor has sailed off into the sunset with a 1.2 million euro a year pension.

Soon, the only ones that will be able to eat are those holding guns.

 My apologies Pilgrim, i should have read your initial post as opposed to answering the last few replies.

Orinoco, no apology necessary! That all makes very good sense to me as a layman!! By the way (Orinoco), my wife is Venezuelan??

I would not know how to buy gold, however at the current price per oz. I think my paltry funds would not buy much!

"Quantative easing." I always understood that a country must have sufficient gold bars to cover any new paper money printed? Otherwise, it is just printed paper, surely? What you are saying smacks of the situation in Germany, many years ago, when a newspaper cost a million Marks!

I did think of transferring my funds back to Sterling but the UK has more debt than Spain, allegedly, so that would possibly be jumping from the frying pan into the fire?

I think for me, with very many years under my belt and questionable health, it is maybe best to "go with the flow" and hope I can enjoy the rest of what has been a very busy, exhausting and rewarding life, in comparative comfort, as long as the powers that be, allow me to?

I'm no expert, but I do take an interest and I think you'll find that gold is at an all time high currently - the smart money moved there a long time ago.   But I was told that if you buy gold it's best to do so in the form of gold sovereigns which being a form of money are not subject to capital gains tax assuming the value increases - I'm not positive this is right though.

But as Orinoco said a good part of the problem is the obsession that the southern Europeans have with not paying taxes - hardly any surprise that in these hard times that the governments have insufficient income to pay for the services they provide.  I worked with an Italian chap who told me some stories of how the southern Italians keep their family expenditure down which includes bypassing electric meters and tapping into mains water supply - a national sport seems a good description.

The measures announced seem to make sense, but if the recession in Europe continues there will be a problem.  There must be a limit to how many bail outs can be achieved, so there can only be one ending.

With all it's faults the UK seems to be making a realistic attempt to balance the books, so I'm keeping as much as I can of my meagre resources in sterling and in the UK.  I suspect that the experts would say that is absurd, it would be great to hear from someone who knows, but for me at least it's likely to be better than the Euro.

 The Gold Standard was abandoned in 1971 in favour of a fiat money system. (Google "Nixon shock" if you´re interested). Investopedia.com describes fiat money quite simply as: 

"Currency that a government has declared to be legal tender, despite the fact that it has no intrinsic value and is not backed by reserves. Historically, most currencies were based on physical commodities such as gold or silver, but fiat money is based solely on faith."

It´s actually been called "the greatest sleight of hand on earth". Money is effectively created by issuing debt. Everytime a loan is issued by a bank new money is brought into existence. The money is not held in the banks reserves, it isn´t transferred from someone else´s deposit account, it is simply created out of thin air by a book-keeping entry. There was an interesting legal case in the States a long time back, where a bank was repossesing a guy´s house. He took it to court arguing that the bank hadn´t actually lent him any money at all, it had simply created the money and therefore hadn´t taken any risk. It was all a bit of a farce until the bank manager took the stand and corroborated what the guy was saying. What´s more he admitted it was standard banking practice, the Judge said it sounded like fraud. Our friend won and got to keep his house. The ruling had huge implications though, it effectively meant that all loans on properties were null and void if the money the banks were lending wasn´t backed up by reserves. Unfortunately the decision didn´t change common practice, it would have brought the whole system down. The judge died 6 months later, he was poisoned.

It´s one big ponzi scheme, which is why a lot of people are asking for a return to a gold standard, where the money is actually backed up by a tangible commodity. When Chancellor, Gordon Brown sold off most of the UK´s gold reserves despite the price being at a 20 year low and against the advice of the Bank of England. It was a shocking decision and he ought to be strung up for it. He sold 400 tons of bullion to the asians at a knock down price of 280$ an ounce, today´s price is 1600$ an ounce. That decision has cost the UK taxpayer millions.

Acer is right in saying that Gold is at a high, but that could be said on just about any given day in the last 5 years and would have been true, it doesn´t mean the price isn´t going to continue climbing, I don´t know anyone that thinks 1600$ is the top of the market, infact some analysts are talking about a price of 5000$ an ounce, although more conservative estimates reckon 2000$ an ounce over the next 12 months is realistic.

It´s certainly going to get interesting over the next few years.

This message was last edited by foxbat on 24/07/2011.

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For a simple if lengthy explanation of how corrupt the global financial institutions have become and how the worlds major corporations are really running the show check out this video from the Zeitgeist Movement...

And this one released earlier this year...

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See Bernie the Boss has got a spot of bother too....