Hasta la Vista Euro, Hello Peseta!

Spanish village goes back to peseta

by Lee Moran
Mail Online
February 15, 2012

A Spanish town is looking to the past to safeguard the future of its ailing economy by reintroducing  the peseta.

Fed up with the failing euro, rebellious locals in Villamayor de Santiago have reverted to using the old currency, which was phased out a decade ago.

Around 30 shops in the historic town,  75 miles south-east of Madrid, started accepting pesetas last month after urging customers to dig out any old notes and coins they had forgotten about.Bring back the peseta: the desperate Spanish village of Villamayor de Santiago has turned back time and re-introduced the peseta in a bid to kick-start its ailing local economy

 Bring back the peseta: The Spanish village of Villamayor de Santiago has re-introduced the peseta. Pictured is a poster from villages on the border with Portugal which are also campaigning for a permanent return
As they were: The peseta was phased out in 2002 when the euro was introduced

News quickly spread, and shoppers from neighbouring villages and towns have been flocking there to spend the old currency.

Luis Miguel Campayo, chairman of the local merchants’ association, who came up with the idea, said:  ‘People kept hold of old pesetas thinking that they might come in handy one day if the euro fails.

 ‘It seems that those fears might come true. Lots of Spaniards,  especially older people, have a strong emotional attachment to the peseta and still do their sums in it when talking about big transactions. The economy is struggling so much that euros are scarce.

‘We thought that if people had a hunt around for their old pesetas, then why shouldn’t we accept them as legal currency?

‘It was after Christmas and shops really needed a helping hand and this is what we came up with.’

 Exchange: The euro and peseta exchange rate stood at 166.386 pesetas per euro when the single currency was aligned in January 1999

The country introduced the peseta in 1868, joined the euro in December 2001 and phased out the old currency in February 2002.

However, unlike other euro countries such as France and Italy, it never set a deadline for exchanging pesetas into euros.

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Greeks Going Back to their Farming Roots

by Tania Georgiopoulou
ekathimerini.com
September 1, 2011

«Here you can go a week without spending a single euro over here,” says a man who moved back to Crete two years ago to live in the village of his birth. “You get fresh food from your farm and if you need something extra, like olive oil for example, you can get it from a fellow farmer. You only need money to pay for your gas and bills,” he says.

He is not alone. For the first time in years, Amari Valley in the island’s Rethymno district has turned green again as fields have been cleared and put back to use as farms.

Recent data on farming in Greece show that the number of jobs in the sector has gone up by 38,000 between 2008 and 2010. This increase is in stark contrast to the grim statistics regarding rising unemployment across most other sectors.

However, a closer examination of the data shows that these born-again farmers are for the most part pensioners trying to make some extra money — particularly by cutting down on their cost of living. Between 22 and 32 percent of those who have taken up farming in the past couple of years are aged between 45 and 64 years old. Some 70 percent of the latecomers in the Epirus region in northern Greece are over 65.

Giorgos Christonakis, a former employee at Hellenic Petroleum, lives between Athens and Amari. “After I retired, I went to look for a house in the village. I have since planted vegetables, I have my own olive trees and I plan to grow wheat so I can make my own bread,” he says. His children, he says, are not too keen on moving to Crete, so he has to travel between places. “But if the state breaks down and I end up losing my pension, what will happen then? At least we will have an alternative; we won’t starve to death.”

A friend of his, 60-year-old Pandelis Zoumboulakis, grows beans and tomatoes in that same valley. Zoumboulakis, a former municipal employee, retired two years ago but has yet to receive his first pension payment. His housing loan installment cannot wait, however. “I get an 800-euro advance on my pension each month. We are lucky my mother chips in to help,” he says.

His children are now independent, and the couple have returned to their family home in Crete to work the land. “We’re not doing it for the money; but at least we know what goes into our stomachs,” he says. “More and more people are coming back to the village to do the same,” Zoumboulakis says. His cousins from Athens recently visited the island to plant some trees. “When they retire in a few years, they plan to move here too,” he says.

On the island of Chios, the collection of mastic from gum trees, an age-old tradition, is experiencing a revival and production last year rose by 20 percent.

Lefteris Karakatsanis, 74, migrated to Germany in 1963 before trying his luck in the United States. In 1994, after he retiremed, he returned to Chios to live with his wife. In the early years, his pension was enough to afford them a decent life. As the euro rose against the dollar, it became harder for them to get by. “At least I make some mastic and we manage to earn some extra money,” he says.

“Mastic is a very good product,” says Giorgos Avdeliodis, 57, who used to work for the Public Power Corporation (PPC). He cultivates mastic trees, but also breeds animals. “Goats, chicken, pigs — mostly for our own consumption,” he says.

For many people on Chios, mastic collection is for pocket money, says Christos Koukouris, a retired naval officer and member of the island’s mastic production board. “But it’s still a tough job.”

Germany and France to Lose AAA Rating

Reuters
August 9, 2011

PARIS/LONDON – France and Britain are most vulnerable within Europe to a rating review following the U.S. downgrade, with anemic growth and hefty borrowing placing them among the shakiest of the world’s triple-A rated lenders.

Both countries have stable rating outlooks, making a sudden downgrade unlikely and markets have been so impressed by Britain’s debt-cutting strategy that they have pushed its bond yields to record lows.

But a surge in the cost of insuring French debt against default on Monday highlighted alarm sparked by Friday’s U.S. rating cut as banks and brokerages warned that rating agencies could now have top-rated European lenders in their sights.

“France has slipped into borderline AA+/Aa1/AA+ (one notch below AAA) territory, so risks to its AAA are rising as stresses spread,” financial services firm BBH said in a note to clients.

In another indication of mounting concern over France, spreads between French and German 10-year bond yields hit all-time highs last week and remained wide on Monday.

The most likely trigger for France to be put on negative watch would be a failure by the government to get parliamentary backing for a constitutional limit on future public deficits, with opposition left-wing lawmakers vowing to reject it.

Euro zone outsider Britain looks less vulnerable, having its own currency which could slide in value and its own interest rate, but it could also come under review given its weaker economic fundamentals.

“There are … lots of countries in Europe that should be downgraded just as the U.S. has been downgraded,” U.S. investor Jim Rogers, co-founder of the Quantum Fund, told Reuters Insider as world leaders battled to calm a market rout driven by concern about U.S. and European debt levels.

After making history by stripping America of its AAA-rating, Standard and Poor’s reaffirmed France’s top-notch status and stable outlook at the weekend. Moody’s and Fitch declined to comment, but neither has given any indication they could change their outlooks on the United States, France or Britain.

Providing further comfort, fund managers poured into French and British bonds in early trading as Friday’s U.S. downgrade forced them to shift funds out of U.S. treasuries.

However, French five-year credit default swaps (CDS) surged 15.5 basis points on the day to a record-high 160 bps, according to data monitor Markit, taking it closer to the level of AA-rated states such as Belgium, though analysts warned the market often overreacts.

“The CDS market is very dysfunctional,” said Mark Schofield, global head of interest rate strategy at Citi.

“Although France from the perspective of fiscal fundamentals looks the weakest of the triple-A issuers in Europe, I still think that given very low levels of yields, the depth of the domestic market, the ability to continue to fund at low levels, it’s unlikely France will be downgraded in the near future.”

As for Britain, he added: “It’s unlikely that the UK will be downgraded. At this point in time, we’ve seen very significant fiscal tightening put in place.”

FRENCH POLITICS IN FOCUS

In the euro zone, only Austria, Finland, France, Germany, Luxembourg and the Netherlands have a triple-A rating, and French debt costs the most to insure.

France also has the highest deficit, debt and primary deficit of any of them and it is the only triple-A euro zone country running a current account deficit.

Its debt to GDP ratio — set to hit 86.9 percent next year and described by the national audit office as nearing the danger zone — could be pushed even higher by France’s contribution to a new Greece bailout.

S&P said in June it would probably downgrade France in the long term without further reforms and that to preserve its AAA rating France must balance its budget in the next five years, something not achieved since 1974.

It could re-examine its rating outlook as soon as the autumn if President Nicolas Sarkozy fails to win backing for his constitutional budget-balancing rule. Winning would require a three-fifths majority in a two-chamber parliamentary vote and the opposition Socialist Party has vowed to vote against.

“It would be a call for action,” for ratings agencies, said Deutsche Bank analyst Gilles Moec.

He said France was “intrinsically in a better situation” than the United States and could stave off a downgrade by accelerating deficit cuts, one idea being to raise value-added taxes and trim social contributions on labor.

Also weighing on France is a possible swing to a left-wing government after a presidential election next April. The Socialists have vowed to tinker, if they win, with a 2010 retirement reform aimed at cutting future pension costs.

WEAK GROWTH UK’S MAIN RISK

Britain has an even bigger deficit, primary deficit and debt to GDP ratio than France, and also runs a current account deficit but weak growth — and the damaging effect that would have on its debt pile — is its main threat.

Moody’s warned in June that it could reconsider its stance on Britain in the event of lower growth combined with weak fiscal consolidation.

Citi’s Schofield agreed, saying: “The big risks would be a very sharp slowdown in growth and/or huge political upheavals, if you started to get a breakdown in the coalition.”

Broadly, however, markets have faith in Britain’s ability to pay back its debt, despite a budget deficit of some 10 percent, because of an austerity plan that includes tax increases and unprecedented cuts in public spending.

Yields on 10-year gilts hit a record low of 2.59 percent last week and British debt continued to outperform European debt on Monday as investors looked for safe havens.

Yet, the economy has basically stalled over the last nine months and even the government’s fiscal watchdog, the Office for Budget Responsibility, has acknowledged its growth forecast of 1.7 percent for 2011 looks too high.

Lower growth means lower tax receipts and maybe a higher welfare bill if unemployment rises, all of which will add to debt.

The opposition has called for emergency tax cuts and some observers were quick to blame riots in London over the weekend on public spending cuts and dire economic prospects.

“Notwithstanding the fact that the UK is still struggling with its own economic recovery, we are pretty confident that the coalition is going to hold in the UK,” David Beers, head of Standard & Poor’s sovereign ratings, told Reuters Insider.