Jeff Rubin raises issue of Spain dumping the euro
In ablog post ostensibly written to lambast Spain’s deep-reaching economic-austerity measures, former CIBC World Markets chief economist Jeff Rubin has floated the possibility that Spain could ditch the common currency and return to its peseta.
“If financially wayward countries such as Greece and Spain are to get back on the path of economic growth, they do have at least one arrow left in the quiver—leaving the euro,” Rubin, a Toronto-based author, wrote on July 18. “By liberating themselves from the fiscal yoke of euro serfdom, the struggling countries of southern Europe could put themselves on better competitive footing with the stronger economies to the north.”
Rubin earlier noted in his blog that Spain’s youth looks set to be hardest hit by the economic outlook, mentioning that 52 percent of the young people under 25 are out of work. He state that this naturally leads to scenes of protest as have been seen in Madrid and other parts of the country, which Rubin noted is the fourth-largest economy in the eurozone.
He pointed out that defaulting “is not without consequences” for the grouping now referred to as PIIGS—Portugal, Ireland, Italy, Greece and Spain. In the case of the last two, inflation “could become a dire problem in itself”, Rubin added.
“Any default would also quickly be felt in the rest of the world,” Rubin wrote. “The same financial institutions that were hit by the US subprime crisis would find their exposure to the European debt market putting them in a painfully familiar spot.”
In May during a visit to the Georgia Straight to promote his new book The End of Growth: But is that all bad? (Random House Canada), Rubin said that, “despite all this incredible stimulus, that our economies are still sputtering”.
“And we’re also going to learn, and we’re learning right now, that yesterday’s bailout is tomorrow’s cutback,” Rubin noted at the time. “And we look at what’s happening with economies like [in] Greece and Spain, and we see that while this fiscal stimulus can give us a short-run spurt, the costs that we pay in the long run just means that it makes it more difficult with triple-digit oil prices.”
Rubin also told the Straight at the time: “The Eurozone will become what it probably should have always been, which is Germany, Denmark, and the Benelux countries. Putting Greece in a currency union with Germany is like putting Mexico in a union with Canada and the United States.”