Although markets have rallied this week, the collapse of the euro is the topic du jour. Mike Steinberger talked with some players in European wine and found that none had a particular plan for handling a collapse. Fair enough: such a cataclysmic event would hold lots of uncertainty and dislocation. And we all know what happens to the best laid plans of mice and men…
But that doesn’t stop us from armchair speculation! If Greece, Portugal, Spain or even Italy were to withdraw from or be bounced from the euro and revert to their national currencies, the theory goes that they would suffer a devaluation but that the cheaper goods would be more attractive on the world market. Assyrtiko, feta cheese and beach vacations would all be on sale and this would help kick start the economy.
Although on a much smaller scale, the wine world does have a recent example of devaluation: Argentina. For those who don’t remember (see a piece of mine from the time for more details), the peso was pegged to the dollar to slay the beast of inflation, but the peg became untenable and when it was cut loose in early 2002, the peso fell by 75 percent against the dollar.
What happened to the Argentine wine sector since devaluation? One thing is that the wines already in the marketplace did not fall commensurate with the peso; A $10 wine did not become a $2.50 wine with the next vintage. In part, that’s because of cost factors since many of the barrels and bottles used in Argentina came from overseas. Also, importers and producers may have an idea of how much their wines should cost and may be reluctant to move to a lower price point as consumers might perceive a drop in quality. But Argentine wines, which previously had largely stayed within the country, went on a tear in the export markets lead by malbec. Foreign investment poured in and the wine sector internationalized.
Would Greek vintners pop corks if the drachma returned, hoping for Xinomavro to be the next malbec? Probably not. Greece doesn’t nearly have the spare capacity that Argentina did ten years ago. Spain or Italy might. But, still, there would be so much uncertainty, it’s hard to imagine a lot of euphoria.
What would be an interesting outcome of a devaluation would be if Mediterranean wines took a turn toward natural, less-interventionist winemaking. Maybe replanting would be too costly, so indigenous varieties would prevail. Oak barrels too expensive, thus no oak or the reuse of old barrels. Ditto yeasts, pesticides and fertilizers, with perhaps a return to horse plowing and organic cultivation and indigenous yeast fermentations? But, then again, maybe an influx of foreign capital would plant everything to Chardonnay.
Anyway, the discussion may be moot if there’s no breakup of the euro; James Surowiecki has a piece on the crisis, saying all it might take to call it off would be dropping Europe’s “catastrophic stubbornness.”