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A Spanish town is looking to the past to safeguard the future of its ailing economy by reintroducing the peseta. Fed up with the failing euro, rebellious locals in Villamayor de Santiago have reverted to using the old currency, which was phased out a decade ago.
Around 30 shops in the historic town, 75 miles south-east of Madrid, started accepting pesetas last month after urging customers to dig out any old notes and coins they had forgotten about.
News quickly spread, and shoppers from neighbouring villages and towns have been flocking there to spend the old currency.
Exchange: The euro and peseta exchange rate stood at 166.386 pesetas per euro when the single currency was aligned in January 1999
Luis Miguel Campayo, chairman of the local merchants’ association, who came up with the idea, said: ‘People kept hold of old pesetas thinking that they might come in handy one day if the euro fails.
It seems that those fears might come true. Lots of Spaniards, especially older people, have a strong emotional attachment to the peseta and still do their sums in it when talking about big transactions.
The economy is struggling so much that euros are scarce.
‘We thought that if people had a hunt around for their old pesetas, then why shouldn’t we accept them as legal currency?
‘It was after Christmas and shops really needed a helping hand and this is what we came up with.’
The country introduced the peseta in 1868, joined the euro in December 2001 and phased out the old currency in February 2002. However, unlike other euro countries such as France and Italy, it never set a deadline for exchanging pesetas into euros.
The town, which is in the same region where La Mancha cheese is made, planned to run the scheme for only a month after it began on January 9.
However, it was such a success that the plan has been extended. Locals are paying with pesetas in chemists, hardware stores and grocery shops among others.
Some have brought notes of up to 5,000 pesetas, worth 30 euros (£25), while many are using coins of just 50, 100 or 500 pesetas. At the end of the project Mr Campayo will take the money to the Bank of Spain in Madrid and exchange it for euros before handing the notes out to the shopkeepers.
So far they have taken more than a million pesetas (£5,000). The Bank of Spain estimates there are around £1.4billion worth of pesetas in Spain that have not been exchanged since 2002. According to a recent study by Spain’s consumers’ association OCU, the price of essential goods has risen by 43 per cent since the introduction of the euro.
The cost of bread is up by 49 per cent while milk has risen 48 per cent and the price of potatoes has increased by 116 per cent. Town mayor Jose Julian Fernandez said he backed the scheme, adding: ‘I support any measure that helps our economy.’
More than a third of the 3,000 people who live in Villamayor de Santiago are unemployed as Spain battles its worst economic crisis since the Civil War.
Nearly a quarter of all Spaniards are out of work, with half of those under the age of 25 unable to find a job – a higher unemployment rate than even Greece or Portugal.
The situation is said to be so poor that those who have jobs are even refusing to go on holiday in case they are made redundant while they are away.
At least four other Spanish towns have been forced to resort back temporarily to the peseta in recent months because of the eurozone crisis.
The news came as Spain faced even more bad economic news yesterday, after learning the EU is likely to take action against its new conservative government for delaying austerity measures.
This is despite prime minister Mariano Rajoy introducing a range of labour reforms in recent days, including slashing severance pay.
With the economy heading back into recession, credit rating agency Moody’s also downgraded the country two notches to A3