The trouble with the Euro

As a student I lived in Valencia, Spain for one academic year as part of my degree course. First and foremost it must be said that the year did not officially count as part of my degree and it was,therefore, more of a holistic Spanish experience than an academic one. 

It was around this time that the European Union was becoming more prevalent in the news as the single European Currency prior to its lauch from a banking and commerce perspective on 1 January 1999.  It would be a further three years until the paisanos naranjeros would get their hands on any actual notes and coins, but the concept had been signed up to and the process of convincing the Spanish had begun. And from what I saw, they did not need much convincing.

If you have ever been to Valencia, and walked along the elegant tiled promenade which stretches the length of La Malvarossa Beach, you may well have seen the large sign proudly announcing that the promenade and beach improvement scheme, had been paid for by a European Union Grant. When I was there in 1997, the promenade was fairly new, and the work which has been done since has transformed what was previously a poor and run down area of the city into a real destination.  Some of the investment has come from private hands as part of the regeneration for the Americas Cup first held in Valencia in 2007, and also the recently added Valencian Grand Prix, however the rest has been paid for largely out of the EU coffers, or to put it another way, by the British, the Germans and the French.

Even in 1998, I can recall meeting young Spaniards in bars who even after several beers and one too many cheap vodkas were very keen to talk about the marvel of the Eurozone. Roughly translated the general concensus of opinion of my local student counterparts, was that whilst the British poured money into the European pot, the Spaniards were quite happy to take it out and spend it, thank you very much. So the 20 year olds of 1998 are now most likely the ones working for the politicians and bankers we are seeing so much of on the TV, scratching their heads about what went wrong and how to fix it. Well, to be precise the Germans the French and in part the British are scratching their heads, the Spaniards, the Greeks and the Portugese especially are probably keeping shtum at the back, as for the last fifteen years at least they have been reaping the benefits of the European Cash Cow, and were savvy enough to recognise that they were onto a good thing.

It is no secret that I have always been against the Euro.  My initial logic was that it would take part of the fun of going on holiday as you only would need one currency to go to mainland Europe rather than experience a new one for each different country.  Further more, I could not see how you could combine even the currencies of countries so diverse in culture and economic status.  Prior to the Eurozone, Spain was a reletively cheap place to live.  The Spanish had enough money to live off even if they were in the lower socio-economic classes because the cost of living was low.  As an example, in 1998 you could buy a bottle of red wine in a supermarket for 189 pesetas, which at the time translated to about 80p.  It was drinkable (especially the 1996 vintage) and as the number of empty bottles in our kitchen would testify, very popular.  When I returned to Spain in 2002, once the Euro was in people's pockets, I observed that the same bottle of wine, Baron de Turis, Valencia, was on sale in similar supermarkets for the princely sum of 2.40 EUROS. At the prevailing exchange rate of around 1.50 Euros to the pound this would be about £1.60.  Even allowing for inflation over four years and the fact that Spaniards do not convert things into pounds, it is not difficult to see that things got more expensive post Euro.  I have several Spanish friends who have also said the same thing, and this has been a primary cause in some of the countries we hear about in the news being in financial trouble as the normal people are no longer able to live comfortably on their incomes as the prices of everyday things went up once converted into Euros. You can see it most clearly on clothing labels for companies who sell the same products in more than one European country.  Zara is great example of this.  Initially, when there was a price per currency it was clear that when converted into pounds it was cheaper to buy most items in Spain than in France, thus reflecting the cost of living in each place relative to the UK.  Post 2002, there was one Euro Price, but this meant that products being sold in Zara in France were much cheaper in real terms to the French than they were to the Spanish, and give that it is a Spanish country this is a bit of an issue. I have not been into a Zara for a while, but last time I did, I noticed that the prices in Spain had been over stickered with a lower price, presumably to recognise the lower income levels of the local market. Obviously on an individual level it is just a little confusing, but on a larger scale across a multitude of industries this practice would cause major issues in sourcing and exporting of goods, which under the free trading rules of the EU is actively encouraged, and so it it little wonder that the whole thing is a bit of a mess.

Now obviously this is just my opinion and as I am not a politician or economic expert, it will remain just that, an opinion of which many, many others are available.  However I was intrigued last week by an article in the paper about some business man who is so concerned about the future of the Euro and its impact on the world economy that he is offering £250,000 of this own money as a prize to anyone who can come up with a solution to extracate individual countries from the Euro with minimal damage to the overall work economy.  to be honest I think £250k is not enough for this particular quest, but it did get me thinking.  Perhaps if we all could dig out all of those old pesetas, drachma, french francs, deutcsh marks, lira and the like from down the back of the sofa, in old suitcases and boxes in the loft, and we send them back to the countries from which they came, perhaps they could have enough to reintroduce their old currencies and get back to a simpler time when they controlled their own destiny and the cultural differences which should be celebrated in all of these wonderful countries could be matched economically.  Plus, as an added bonus it would make going on holiday that little bit more exciting again.