A Good Idea, Two Years Ago

A rapid fall in the euro can save Spain – FT.com.

Even a rapidly depreciating euro will not save the whole project. Investors are avoiding PIIGS debt due to insolvency and illiquidity concerns. Adding currency risk to the operation will only keep foreign investors away. When you run a current account deficit, you simply need foreign investors to finance your debt.

Two years ago, a sharp drop in the price of the euro may have stimulated demand for European goods and services so that they would have been able to finance themselves. Now, a falling euro is just more bad news.


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