Euro’s imminent collapse set to make Mediterranean affordable

The imminent collapse of the Euro will make traditional summer sun destinations like Spain affordable once again, leading economist Douglas McWilliams told the first Abta Travel Matters UK conference.

The founder of the Centre for Economic and Business Research told delegates he believed it was inevitable that the European currency would fail and that Spain would be the first country forced to exit it.

He said Spain’s failure to address its own banking crisis brought on by over exposure to a weak housing market would precipitate its exit and then other countries like Italy, which has “lost 40% of its export market” due to the Euro, would use the excuse to leave too.

McWilliams said these countries, and others like Greece, are unable to devalue as they once did when they had their own currencies to cope with financial crises and this makes continued membership of the Euro untenable.

 “Until it breaks up, the Euro will go south,” he said. “We will get a new set of travel destinations re-emerging. I think that the traditional destinations will come back again when they go back to the good old days of using Lira and drachma.

“It was always clear that the Euro was a political thing. For money to be dominated by politics is always a bad idea.”

McWilliams predicted a period of reasonable oil prices of between $60n and $100 a barrel, sustained by Saudi Arabia which he said will be able to control prices through supply until 2016.

He also predicted sustained low interest rates for up to four years, a VAT rise to 20% in January and depressed consumer spending in the UK as the country slips down the world league economic table from seventh to eleventh by 2015.

McWilliams said the world economy was in recovery mode but that was being led in developing countries like China, Brazil and Russia and that was part of a long term shift in economic power away from the west.

The public spending cuts required in the UK will depress the UK economy, McWilliams said, as up to one million public servants lose their jobs, as will increased levels of spending and low levels of wage inflation.

 But one bright sign for the travel industry was that although consumer spending will remain flat those who have money were starting to spend again and they were starting to look for the finer things in life.

“I do think the consumer is starting to change focus a little. Last year they spent more on essentials and squeezed spending on luxuries.

“We are starting to see a big squeeze in spending in superstores and people are going out to eat in restaurants again. I think we will see people wanting to have a bit more fun in their lives.”

McWilliams said countries like Spain will have to focus on more value-added holidays rather than cheap bucket and spade to take advantage of a revival caused by the collapse of the Euro.

“It won’t just be cheap and cheerful, they are going to have to have a much wider range of offers. These countries can’t just rely on mass tourism.”

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