Our Portugal

Time to say goodbye?

Has all the recent news about the potential breakup of the Euro been giving you sleepless nights? You want to plan your future but can’t decide what’s going to happen or how it will effect your decision?

I read an interesting internet article recently: – http://www.lovemoney.com/news/the-economy-politics-and-your-job/the-economy/13456/why-we-should-want-the-euro-to-collapse?

Be assured that I am no bank or government employee, just an ordinary person trying to make sense out of all the hysterical reporting and speculation.

What happens to you if you are living in Portugal and we have a “Eurocrash?”

The Centre for Economics and Business Research (CEBR) reckons that that a break-up of the Euro would see the UK’s gross domestic product (GDP) fall by 0.5%, and possibly push the UK into a second recession. The CEBR argues that it’s not the “disaster” that a Euro break-up is painted as in the press. **I think this means that the value of our UK money would be okay.

In the post-Euro future envisaged by the CEBR, the stronger economies within Europe – apparently there still are some – would see their newly re-launched domestic currencies gain in price compared to Sterling. ** Would this push the price of Portuguese properties up?

Furthermore, with all of the countries going their separate ways, those in a decent position would be able to escape some of the austerity measures they would otherwise have to endure. This would free them to pursue growth.

Here’s the explanation from Douglas McWilliams, chief executive of the CEBR: “If it breaks up, the immediate pain is much more intense but then there is a more stable basis and we would expect that within about 30 months growth will actually be faster than if the Eurozone survives in its current form.

“After five years we would expect the UK to be at least as well off if the Euro breaks up as it would be under the alternative scenario of holding it together.”

Looks like a case of “swings and roundabouts” to me.

Of course, the lovely thing about making predictions like this is that nobody can ever say for sure whether you’re wrong.

What we can say with certainty is that the difficulties on the continent are being felt here.

So what about the UK in your “should we stay or should we go” decisions?

The UK Prime Minister gave a speech to the Confederation of British Industry in which he said that the Eurozone crisis was having a “chilling effect” in theUK, due to the panic it has sparked in the markets.

Of course the real issue with theUKeconomy is our seeming inability to establish any growth. The Bank of England cut its forecast for 2011 from 1.7% to just 1%, for 2012 from 2% to 1% and for 2013 from 3% to 2.5%.

However, even Sir Mervyn King, the Governor of the Bank of England, admitted this was essentially guesswork as there was no way to quantify the effects of “the most extreme outcomes associated with developments in the euro area”.

If the experts are admitting that they don’t know what’s going to happen yet they are in control we have can only rely on our instincts to decide what to do.

The fact is that, whether the Euro collapses or not, there’s still a very real threat of a second recession. Perhaps that’s why the government has suddenly discovered some money to throw at the problem, by giving the property market a £400 million boost and promising a “massive credit-easing scheme” to help small- and medium-sized business to borrow money.

Goodbye Sterling, hello Euro?

Of course, not everyone agrees with the CEBR that this is, potentially, the death knell for the Euro. In fact, talk has sprung up once again of when – rather than if –Britain will join the single European currency.

Wolfgang Schäuble, the German finance minister, said that in spite of the current issues on the continent, the survival and stabilisation of the Euro will convince others to join, Britain included. Indeed, he suggested it would happen “more quickly than people in the British Isles currently believe”.

It’s one thing for a European finance minister with an interest in the Euro’s survival to make such a claim, it’s quite another for a grand old figure of British politics to do so.

But that’s exactly what has happened, with Lord Heseltine, the Tory peer, arguing that Britain will eventually sign up. Heseltine reckons that Germany and France have too much to lose, and so will ensure the Euro survives. And, in time, they will be joined in the single currency by the Brits.