The vast majority of expats in Spain are of the opinion that the euro will not collapse.

Despite the doom and gloom surrounding the Spanish economy, the belief by many experts that Spain holds the key to the Eurozone it seems that the vast majority of expats in Spain are of the opinion that the euro will not collapse. Even though when amalgamating all of the individual country votes together there is still a distinct opinion that the euro will not collapse there is worry that many people are adopting a blind faith strategy as opposed to waking up and smelling the coffee. Again, we’re not sure of the breakdown between non-European and European expats currently living in Spain who entered our online poll. However, we can safely assume that there will be a significant number of European expats living in Spain due to its ongoing popularity amongst a whole range of different nationalities. So the question now is whether the experts are reading the economic situation in Spain incorrectly or indeed the growing confidence on the ground regarding the future of the Eurozone’s fourth largest economy is a reflection of the correct situation? We can only take these votes at face value of and despite ongoing economic concerns and funding issues it seems that the vast majority of expats would like the euro to survive and fight another day. This in itself is a useful element to consider from our online poll vote because general opinion prior to this ongoing issue seemed to suggest that many people were not overly concerned about the survival of the euro. Is this renewed confidence a consequence of recently introduced austerity measures which are hitting people hard yet giving the impression they are doing their bit for the Spanish economy? Yes, it would affect my savings back home (17.65%) It appears as though expats living in Spain are least concerned about the short-term future of the euro than their non-European counterparts. The 17.65% share of the vote in relation to a potential impact upon savings back home is less than the overall votes cast for this particular answer. So initially we have fewer people showing any concern about the future of the euro and now we have fewer people concerned about their savings back home. Is the rest of the world reading the European situation wrong? The impact on savings currently denominated in euros would be the same whether you are living in Spain or any other Eurozone country. However, the overall impact of a collapse in the euro could well lead to lower interest rates to try and inject confidence into the markets which would effectively freeze savings accounts at their current levels. When you take into account even the most minimal inflation figure across Europe, even if many are currently in excess of 3%, the real time impact upon savings accounts within the Eurozone is detrimental. If interest rates are set at zero as a means of injecting confidence into the markets, and the cost of living continues to rise, then savings are effectively falling in real terms. Many people forget the fact that while their savings may well stagnate with zero or very little interest earned they are effectively going backwards as the cost of living moves up and up. For those holding savings in non-euro accounts they may well feel protected in the short term from any problems within the Eurozone but as we have mentioned on numerous occasions, if the euro was to collapse then the whole world would be affected. The dream of a federal Europe is now laying in tatters and Eurozone members are now entering a vital phase of the recovery programme. The problem that the euro may have in the future is the fact that a concerted effort by investors to drive the currency lower, despite relatively upbeat statements from Eurozone members, certainly won the day. As a consequence, what is to stop investors targeting the euro in the future? No, I use a FX tool of any kind to make the most of currency volatility (11.76%) It seems as though some expats living in Spain have been looking at the currency markets in great detail and indeed a number have used foreign exchange tools to try and benefit from ongoing market volatility. This is an interesting development because it shows that while in general expats living in Spain do not believe the euro will collapse they are more than happy to benefit from currency volatility. But is this sensible behaviour? The foreign exchange markets are in many cases the tail that wags the dog with the dog being the European wide economy. It is common knowledge that the vast majority of short, medium and long-term economic indicators are reflected in the currency markets prior to their transfer to relevant stock markets. Currencies are more susceptible to news flow, both good and bad, and very often “convenient leaks” can set the markets up for particular news. The idea of using foreign exchange tools to benefit from currency volatility would tend to indicate an interest from speculators looking for short-term gain. But is this the right attitude? If you have moved to Spain to begin a new life then we can possibly understand if you wanted to use foreign exchange tools to insure and protect your existing assets and existing funds. But why on earth would you look to speculate with your financial future in a market which even the most ardent investors are finding very difficult to read. Moving to a new country is a stressful occasion at the best of times but adding market speculation to the mix will not help you settle down in the short term. Have voters ever considered using foreign exchange tools to insure their assets? Hedging or protection strategies are very simple ways of putting a floor under your assets in relation to the exchange rate of the euro. If the euro was to collapse then you would simply activate your hedge/protection strategy and your downside would be limited. If the euro was to recover and go from strength to strength then you may feel as though you have wasted your “insurance premium” in the shape of the hedging/protection strategy but you have given yourself peace of mind during the most volatile and dangerous period that the euro has known. Yes, it would affect my purchasing power (17.65%) Despite the fact that more expats in Spain believe that the euro will not collapse the joint second top answers to our online poll suggests concern about their savings back home as well as their purchasing power. However, if we compare the 17.65% figure associated with expats in Spain against the average for the overall online poll of 25.11% then again we are starting to see signs of support for the currency. If your savings and your income are already held in euros then it is difficult for us to see where your purchasing power might be directly impacted on a collapse. However, it would be impacted if you were looking to spend money overseas and had to exchange your euros, it would be impacted if inflation ran out of control and the cost of goods and services increased and it would be impacted if you’re savings attracted little interest. It is also worthwhile noting that in the event of a Euro collapse it is likely that unemployment would increase dramatically and there would be pressure on wages. This may also reduce your purchasing power in the short to medium term. The worrying sign for many expats is the fact that savings rates have been relatively low for some time now yet inflation continues to cause concern. The net impact of lower savings rates and higher rates of inflation is that for the last few years each and every penny of your savings is reducing in value in real terms. This will have a major impact upon your purchasing power unless you are able to increase your income or increase your savings rate.