Nomura takes on the meme that a weaker euro will help Spain, pointing out the country's main...

Nomura takes on the meme that a weaker euro will help Spain, pointing out the country's main trade is with its eurozone partners, meaning a cheaper currency offers no assistance. Secondly, Spain (compared to Ireland, for instance) is not a particularly open economy, meaning exchange rate movements have little impact on GDP.

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Comments (3)
  • Tack
    , contributor
    Comments (16556) | Send Message
    It's still beneficial because the lower euro benefits the exports abroad of Germany France, and Italy, whose expanding economies will purchase more from Spain and other EU countries.
    26 Jul 2012, 03:09 PM Reply Like
  • Kevin Flynn, CFA
    , contributor
    Comments (635) | Send Message
    Nomura's piece misses on a couple of key points. It is true that Spain does not export outside of the EU as much as, for example, Germany and Ireland.


    However, tourism in Spain is a major industry: as of 2008, it was over 17% of GDP. A lower euro not only entices additional tourism from currencies that strengthen versus the euro, it will tend to push all eurozone-based tourism within the zone as extra-zone destinations escalate in price. Spain would benefit on both counts.


    In addition, one of the biggest drags on Spain's economy is its housing bust (heavily fueled by foreign speculation). Were the euro to devalue 20% versus the dollar, for example, then Spanish property and mortgage owners could realize a price in local terms 10% higher than the current market value, yet nevertheless be 8% LESS than current prices to a dollar-based investor. Clearing Spain's property market would be a major benefit.
    26 Jul 2012, 05:09 PM Reply Like
  • marilyn61
    , contributor
    Comments (173) | Send Message
    With such a vast amount of property for sale now in Spain plus all the unfinished new builds of which many are large apartment blocks, one can only hope that the current Euro exchange rate will encourage investors to buy in these difficult times.
    27 Jul 2012, 02:51 AM Reply Like
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