The reason why this month's missive is later than usual is that I have just returned from my annual golf outing to Portugal. Normally I would not bore anyone with my holidays abroad, and don't worry there are no photographs attached at the end. However, this time I felt my trip was a perfect example of what is wrong with the Euro.


I have visited Portugal at the same time of year for the last three years. Previously restaurants were busy and getting the ideal tee time nigh on impossible. This year things were very quiet and we had our choice of tee times on any of the golf courses we played. The weather was perfect so it wasn't this that was keeping people away, nor was it the condition of the courses which were immaculate. My guess, it was the near parity between the Pound and the Euro that was the main culprit.


Portugal, like Spain, Greece and Ireland, believed that when they joined the Euro in 1999 they were entering financial Nirvana but have quickly found out that this was a mirage. When the Euro was started the countries mentioned all experienced a massive boom in property prices as the ability to borrow cheaply and have a strong currency took effect. However, as we know the party ended a couple of years ago, and whereas in the past these countries would be able to devalue their currencies which would lead to an increase in demand for their goods and services, they now find themselves in a financial straightjacket that even Harry Houdini would struggle to get out of.


How do you encourage people to come and spend money that is vital to get the country out of the mess it finds itself in when there are far cheaper alternatives available elsewhere? Turkey, for example, is seeing an unprecedented demand from golfers who are taking advantage of the Turkish Lira exchange rate. How many millions if not billions will Turkey get from foreigners spending money that would have previously landed in Spain and Portugal? As time goes on the situation will get worse as the lack of visitors means there will be less money to spend on maintaining the quality of resorts which could have the knock on effect of deterring more people from visiting.


I must say, I really can see no easy answer to the problem Portugal finds itself in. The recent bailout by the ECB was like putting a sticking plaster on a gaping wound, and there is no doubt in my mind that Portugal will have to go back, begging bowl in hand.


What is really required is for there to be either a two tier Euro, or for countries to be allowed to leave the Euro and return to Escudos, Pesetas and Punts. However, I do not believe there is the political will to see through what would be an undoubted logistical nightmare.


So, Portugal which has seen its unemployment rate rise from 4.6% when it joined the Euro to 10.7% now will be forced to struggle on taking medicine that is only going to delay the inevitable. Oh well, at least it's sunny!



Steve Forbes

Managing Director

For and on behalf of Alan Steel Asset Management


Authorised and regulated by the Financial Services Authority


Award Winning Investment Advisers



Steve Forbes
Managing Director
Alan Steel Asset Management Ltd is authorised and regulated by the Financial Conduct Authority

The Financial Conduct Authority does not regulate tax advice

This letter is the personal view of Steve Forbes. Please check the appropriateness to your individual position with your adviser before taking or refraining from any action.