Euro woes aid European expats

Euro zone expatriates in the UAE are enjoying a three per cent pay rise as a result of the single currency's woes.

Expats sending money back to the euro zone have had the spending power of the dirhams they earn boosted by the slide of the euro. Delores Johnson / The National

European expatriates in the UAE are among the few winners from the crisis ripping through their homelands.

Expats sending money back to the euro zone have had the spending power of the dirhams they earn boosted by the slide of the euro.

Gonzolo Gaspar is one of many who are benefiting from the euro's 3 per cent slump against the dollar since the start of the year. The dirham is linked to the dollar through a fixed exchange rate.

"I transfer money back to Spain on a monthly basis as I have a mortgage to pay there and as we are being paid in dirhams here our salary is actually increasing," said Mr Gaspar, 47, a regional agent for the IE Business School. He sends about half of the money he earns in Dubai back to support his two children and help pay off his mortgage at his home in Santander.

Al Ansari Exchange, one of the country's largest exchange houses, is also starting to report a rise in demand from people wanting to send money home.

"It's the right time for expats to remit, and people are, but they are also waiting as there's speculation the currency may fall further," said Mohammed Al Ansari, the chairman of the exchange.

Yesterday afternoon, the euro was trading at US$1.26. That compares with $1.29 at the start of the year.

The currency was forecast to fall further to about $1.15 towards the end of the year, said Derek Halpenny, the European head of currency research at Bank of Tokyo-Mitsubishi.

"Compared to two months ago you are getting more euros for your dollars but there may be better levels as the crisis plays out," he said.

"It's becoming obvious the crisis in the euro zone is not over, so the primary safe haven alternative is the US dollar."

In a sign pressures are likely to remain on the euro, Spanish borrowing costs rose during a €2.1 billion (Dh9.72bn) bond sale yesterday.

Spain, the latest centre of the crisis, paid a rate of 6.044 per cent on the 10-year bonds, up from 5.743 per cent during its last bond sale in April.

Spanish officials have warned the country needs to secure a bailout for its banking system before its borrowing costs become unsustainable.

George Osborne, the UK chancellor, yesterday stressed action was needed soon.

"You would need to sort out immediately the situation in the Spanish banking system and resolve the uncertainty there," he told BBC radio.

An IMF report on Spanish banks will show the country's lenders need a cash injection of at least €40bn, according to sources in the financial sector, Reuters reported yesterday. Set to be published next Monday, the report is expected to say a total of €90bn is needed to rebalance the entire banking sector, the newswire reported, citing one of the sources.

British expatriates in the UAE remitting money home are also benefiting from the pound's weakness against the dollar. Sterling is close to its lowest point of the year against the dollar. Signs of weakness in the UK mean it is worth about 6 per cent less than early last month.

The Bank of England yesterday decided against injecting more stimulus to help the struggling UK economy. Interest rates were kept unchanged at a record low 0.5 per cent and the total quantitative easing to date will remain at £325bn (Dh1.85bn) , the bank decided.