“The euro debt crisis, like any really spectacular geo-economic event, is spawning its own special vocabulary” said Matthew Lynn of Strategy Economics on Wednesday.
We can now add Spexit to a list which includes Merkozy and Grexit, and Lynn believes the chances of Spain leaving the euro are now higher than those of Greece leaving.
“The Spanish are a lot more likely to pull out of the euro than the Greeks, or indeed any of the peripheral countries” said Lynn.
“They are too big to rescue, they have no political hang-ups about rupturing their relations with the European Union, they are already fed up with austerity, and there is a bigger Spanish-speaking world for them to grow into,” said Lynn.
“One in four Spanish households now have no bread-winner. Retail sales are falling 10 percent year-on-year. Yet the prescription from Brussels and Berlin is precisely the same as it has been for every other country struggling with the euro. Endure a deep recession. Let unemployment rise. Allow wages to fall until you claw back competitiveness,” he said.
6 Reasons Spain Will Leave the Euro First
The Grexit, short for Greece finally giving up on the single currency, has been trending for the last few weeks. And coming up next: the Spexit.
In Greece, people have just about put up with it — until now. So have the Irish, the Portuguese, and the Italians. The Spanish won’t. Here’s why.
One: Spain is too big to rescue.
Two: Spain has tired of austerity already. Remember, the protests against cuts began in Madrid a year ago with the “indignados” movement, which started sit-ins across major cities in 2011. The protests spread from there to Greece, and other euro-zone countries. The austerity had hardly even begun, yet already it has provoked strong opposition.
Three: Spain has a real economy. The Greeks understandably feel nervous about life outside the euro zone. They don’t really make anything. Spain is a successful economy with a perfectly respectable industrial base – its export to GDP ratio is 26%, similar to the U.K., France or Italy. Only last week the Japanese car-maker Nissan announced a major new investment there.
Four: Spain is politically secure. For many countries, euro membership is more about politics than economics. The Greeks stay in because it locks them into Europe (rather than being part of the Turkish sphere of influence). Latvia wanted in because it made it part of the EU rather than being dominated by Russia. For the Irish, it is about separating themselves from Britain. The Germans stick with the euro because the EU still represents a break with its troubled past.
Five: Spain has bigger horizons. The Spanish economy looks partly to Europe. But it looks just as much to the booming Spanish-speaking economies of Latin America (and indeed the huge Hispanic market in the U.S.). Rather like the U.K., Spanish business has always looked to the global rather than the European market. Why tie yourself to a failing project when there are much bigger opportunities out there?
Six: The debate has already started. There is already a serious discussion underway in Spain about the future of the currency. Plenty of mainstream economists and pundits are arguing that the real problem is the euro, and Spain will only recover once it gets the peseta back. The taboo has been broken. That isn’t true in Greece, where even the far-left Syriza party still clings to the idea that it should stay in the euro.
Debate in Spain
If prime minister Rajoy refuses a bailout by the Troika, what other options does Spain have? Is another puppet government like we saw in Greece and Italy coming up?
The sooner Spain sees the light and gets out of the euro that is strangling it, the better off Spain will be.
Mike “Mish” Shedlock