The El Pais Screwdriver Blog openly asks “Are we to Liberate the Euro?“
Here is a Mish-modified translation:
Today Spain has reached a record number of unemployed. Although we do not like the current state of things, no one seems to know against whom to direct their anger.
Actually, we are under a dictatorship perhaps worse than the Portuguese or Spanish forty years ago because it is more subtle and works almost invisibly. And we can embody it too, not in an institution or a person, but with a symbol: the euro.
There are many reasons to believe that Spain would not be as bad off out of the single currency. To explore this question we must look at least three things: First, what is the profile of the countries that have left monetary unions? Second, what does empirical evidence tells us regarding effectiveness of countries have left currency unions? Third, what are the economic and social conditions that need to be taken into account in making such a decision?
Spain fits he profile of the countries that have tended to get out of currency unions: large countries economically developed with well-established democracies.
Second, what empirical evidence tell us? According to the IMF, no countries have been able to make needed fiscal consolidation without a mixture of structural reforms and monetary policy changes. Spain compares favorably in this respect to Argentina and Korean cases. Argentina went off the dollar peg in 2002. Although initially the Argentina economy suffered a severe recession, the year of the return to the country was growing weight (and in fact has grown at an average rate of over 7% from that year until 2011).
Third, we must take into account, the real exchange rate, the financing capacity of a country, and the behavior of its exports. In relation to the three aspects, Spain has bad fundamentals including a competitiveness problem that comes largely from an overvalued euro and a long-term funding problem with interest rates far higher than other countries in the eurozone.
To all this we must add the “social” setting: in addition to more than six million unemployed, Spain has become the second most unequal country in the eurozone and in the fourth of the entire European Union in terms of income distribution.
It is difficult to plan in advance what would be the results of a euro exit for the Spanish economy. Initially this would mean an impoverishment of the population, but classical theory tells us is that the recovery of monetary sovereignty coupled with the devaluation of our new currency push exports and thus growth so that the country would create jobs. Job creation would without doubt have a positive impact on the reduction of our current levels of inequality.
The shackles of yesterday’s dictatorships are different than today. Or are they? It depends on how you look at things. Will we also be free of these shackles?
The author of the above article is Antonio Estella, Professor of European Union Law and Professor of Administrative Law at the University Carlos III of Madrid. He holds a PhD in law from the European University Institute and holds a Master in European Law from the Free University of Brussels.
The important point is not agreement or disagreement with the author, but rather that a eurozone exit is now openly presented as a viable option in a mainstream Spanish newspaper.
Expect such sentiment to grow along with rising unemployment and a sinking Spanish economy.
Mike “Mish” Shedlock