The financial sector has entered a long hallway of economic problems in Spain. In the last year, to today, the euro has lost almost 8% of its value against the dollar. This is the result of such factors as the rise in interest rates by the US Federal Reserve.
Nowadays, the exchange rate is 1.07 US dollars per 1 euro. This is the lowest rate since 2017. Some investment banks, such as JP Morgan, and also analytics firms such as CMC Markets and Capital Economics, suggest that these two currencies will reach parity this summer. This will be the most important milestone for the global economy in two decades.
Experts interviewed by Idealista, the real estate website, consider the parity scenario quite plausible and indicate that this turn of events will cause serious economic consequences and affect the property market.
Currency parity is a negative scenario for the Spanish economy
Daniel Lacalle, Chief Economist of Tressis investment firm, says: "The weakness of the euro is a direct result of the European Central Bank's inaction on monetary issues, as it is one of the few central banks in the world that has not yet raised interest rates to keep inflation down."
Lacalle adds that the eurozone went from a trade surplus, strong euro inflows, and subdued dollar sales, to a deficit when the circumstances changed. According to the economist, parity is plausible. In this case, the cost of imported goods will grow even more, and inflation will increase. The euro's status as a solvent world reserve currency will be undermined.
The same is still true for Miguel Cordoba, a professor of financial economics at the private CEU San Pablo University. Cordoba emphasizes: “The fall of the euro against the dollar is bad news for Spain in global terms. The country simply does not have enough energy resources to meet existing needs, and these resources are paid for in dollars in the market.”
Cordoba also stresses: “The currency depreciation means that exports can increase as importing countries will pay less and, therefore, they will be able to buy more goods outside of the eurozone. On the contrary, an expensive dollar will make our imports more expensive, especially with regard to gas, oil, semiconductors, raw materials, and other things. This is about everything that is seriously lacking in Spain. This will lead to even higher inflation than is the case today. This will become pretty obvious when companies transfer higher production costs to the price of the final product.”