If you thought you were witnessing tough times in the UK, just take a look at Spain for a little perspective. I’m spending my third year abroad studying in Barcelona and never have I been more intensely aware of the economic woes of the people around me. Wages falling, retirement age rising, government bond yields still over 5%, stagnant GDP growth, and over 20% unemployment – it all adds up to some pretty pissed-off locals. So when I read in a local newspaper this week about a town which had given up on futile strikes and was taking its own proactive measures against the systemic Spanish hardships I was thoroughly impressed.
In the Atlantic province of Galicia the local businesses of a tiny pueblo named Mugardos have begun accepting the old Spanish currency of pesetas. The idea is that local businesses which are struggling because of feeble consumer demand will get a boost by giving everyone a chance to get rid of the pesetas they forgot to change into euros 9 years ago. The businesses can then make a communal trip to the Banco de España in Madrid where they can still exchange the pesetas for euros.
This is an incredibly brilliant idea for a number of reasons. It taps into a huge dormant source of wealth – the Banco de España estimates that Spaniards are still sitting on 1.7 billion euros worth of pesetas! What’s more, the market is effectively the entire nation and, indeed, businesses in Mugardos are reporting visitors from all over Spain.
It is particularly interesting for an economist because this situation showcases the peculiar properties of money – something physical which has had no real worth to the owner since the switchover to the euro has suddenly been re-imbued with purchasing power and once again has value. Nothing about the material notes or coins has changed in all this time, only their interpretation.
But my favourite aspect of this new idea is the symbolic move against the euro. With many Spaniards begrudging their new currency and blaming it for their recent troubles this is the perfect way to give it a kick in the proverbial balls.
In the Atlantic province of Galicia the local businesses of a tiny pueblo named Mugardos have begun accepting the old Spanish currency of pesetas. The idea is that local businesses which are struggling because of feeble consumer demand will get a boost by giving everyone a chance to get rid of the pesetas they forgot to change into euros 9 years ago. The businesses can then make a communal trip to the Banco de España in Madrid where they can still exchange the pesetas for euros.
This is an incredibly brilliant idea for a number of reasons. It taps into a huge dormant source of wealth – the Banco de España estimates that Spaniards are still sitting on 1.7 billion euros worth of pesetas! What’s more, the market is effectively the entire nation and, indeed, businesses in Mugardos are reporting visitors from all over Spain.
It is particularly interesting for an economist because this situation showcases the peculiar properties of money – something physical which has had no real worth to the owner since the switchover to the euro has suddenly been re-imbued with purchasing power and once again has value. Nothing about the material notes or coins has changed in all this time, only their interpretation.
But my favourite aspect of this new idea is the symbolic move against the euro. With many Spaniards begrudging their new currency and blaming it for their recent troubles this is the perfect way to give it a kick in the proverbial balls.
Post written by Stephen Devlin - 3rd year MA (Hons) Economics
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Brilliant post! Thanks!
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