Collapse of Euro, Return of Peseta Discussed in Spain
July 28, 2012 • 9:35AM

In recent days, Spanish media have been portraying scenarios of a collapsing euro, and of Spain then being forced to return to its old national currency, the peseta. Jose Luis Gomez, a leading columnist at the news daily El País, wrote yesterday in his blog that a total failure of the euro and a return to the peseta cannot be excluded.

Today, the media (including Spanish ones in Ibero-America) report about a brand new survey done by the research department of BBVA (Banco Bilbao Vizcaya Argentaria), one of the biggest banks of Spain, investigating the total collapse of the euro, and the "return of each country to its original currency." Other big international banks active in Spain have done calculations as well, on a return of the peseta: Japan's Nomura believes the Spanish currency would depreciate against the euro by 35.5%; Switzerland's UBS, Citigroup, and the Dutch Rabobank expect depreciations in the range of 40 to 60%, during the reintroduction period of the peseta.

El Periodico del Aragon reported (07/22/12) under the headline "From the Euro to the Peseta?", that Kai Konrad, Chairman of the Council of Scientific Advisors to the German Ministry of Finance, told some 200 Spanish bankers and businessmen a week ago, that "we cannot guarantee that the Eurozone will be sustainable." Konrad, invited by the Aragon businessmen's association, ADEA, said that a break-up of the euro would be costly, but people overestimate what Germany, with its own debts, can do financially, and there will be no bailout of Spain like that of Greece or Ireland. Hence, El Periodico's headline.

This just shows that whereas leading politicians like German Chancellor Merkel, French President Hollande, and ECB President Draghi are still launching big propaganda for the "rescue of the euro," bankers and others are already preparing for the failure of the euro, and beginning to think about something else (some of them even warming up to the idea of bank separation now).