PESETA. The monetary unit of Spain. It is divided into ioo centimos. It is a coin of 5 grammes of silver .835 fine, and was thus equivalent at par to the silver franc.
The history of the peseta since 1914 is in many ways a curious one. During the war, Spain escaped the huge losses incurred by the Allies, but was involved in the general economic dislocation. Nevertheless, she preserved her currency and exchange system intact. At the beginning of 1919, the pound was quoted at Ptas. 23.67, and a year later at Ptas. 19.72. At this latter date, the Peseta was at a premium of 33 per cent, or was alternatively worth 12.2 pence against its par value of 9.5 pence, or 19 cents.
Internally, the note issue had expanded from Ptas. 1,931 mil lions in 1913 to Ptas. 4,326 in early 1921, but the Bank of Spain's "cover," or reserves, had risen from Ptas. 1,390 millions to Ptas. millions, of which Ptas. 2,456 millions were gold.
The weak spots were the budget, the foreign trade balance, the American exchange and the internal price-level. For 1920-21 the budget had a deficit of Ptas. 633.5 millions. In 1920 the adverse trade balance was Ptas. 406 millions, which was not abnormal in relation to 1913 and the intervening rise in prices. But for 1921, it rose to Ptas. 1,252 millions, and remained there or above until 1924. In New York, the peseta fell from its parity of cts. 19.295 to cts. 13.53 for 1921, while between 192o and 1921, in ternal wholesale prices only fell by 14 per cent., whereas in
America they fell by 35 per cent, and in England by 36 per cent.
The fact is that, whereas in 1921 England, Sweden, Holland and the United States were well embarked on the path of deflation and reconstruction, Spain was delayed by her war in Morocco, and by wasteful and inefficient Government administration at home. After the revolution of 1923 matters began to improve. The budget deficit was gradually reduced, until, in 1927, a small surplus was actually realized. The adverse trade balance was similarly contracted and the ratio of legal cover to notes was main tained at the pre-war figure.
The result was a steady improvement in the peseta, so much so that during 1927 there were constant rumours of its impending stabilization at Ptas. 25.22 to the pound. The Spanish Govern ment, however, made it clear that stabilization would not be hur ried. Subsequent events were to reveal the wisdom of this de cision since, as with other countries, successful stabilization de pended upon internal economic and political stability. In early 5929 political events in Spain caused a fall in the peseta exchange serious enough to undo the improvement of many previous months. Its subsequent fluctuations at rates running over 3o to the pound showed that the restoration of political stability must pre cede currency stabilization.