High Debt, Make EU Vulnerable
Monday, March 28, 2011 08:30
After Greece and Ireland, one by one EU member state must bailout. In Portugal, these conditions force the resignation of Prime Minister Jose Socrates. How fragile the Eurozone economy.
Senior Economist Center for Strategic and International Studies (CSIS) Djisman Simandjuntak said the case in some EU member states was triggered by a breach of the Stability Pact. Among other things, the debt ratio should not exceed 60% of gross domestic product (GDP) and annual borrowings should not exceed 3% of GDP.
According to him, all countries should abide by the euro denominated pact. But, that's who violated the member countries of the European Union called Gypsies (Greek, Italian, Portugal, Spain and Ireland. "Because, its debt was well above the maximum level," he told INILAH.COM, in Jakarta, yesterday .
Based on data from the International Monetary Fund (IMF), in 2010 the ratio of debt to Greece's GDP amounted to 124.9%, 120.1% Italy, Portugal 84.6%, Ireland 82.9%, and Spain 66.3%. "For the moment, Portugal, is one of the countries most affected by the ratio of debt," he said.
Therefore, he continued, is a recipe to deal with macro-economic tightening. The state budget that had to be shortlisted. "But, on the other hand, tightening it just raises the problem of unemployment," said Djisman.
He also explained, the high debt ratio of Gypsies is a problem for the eurozone as a whole because it has the same currency is the euro. Whatever actions taken large debtors, influence on European countries to another. "Thus, countries with high debt ratios is not possible to avoid a bailout from countries with low debt ratios," he said.
Other European countries debt ratios are low, do not want to weaken its currency due to its neighboring countries which have high debt levels. "In fact, every debt crisis, will drag its currency weakening," said Djisman.
If the euro continues to weaken, the wealth of German, French, Dutch and other European countries are also eroded. Purchasing power was weakened and the level of consumption tends to fall. "National income would weaken the country concerned. Would not want to be the bailout of the debtor countries that, "he said.
But the bailout still leaves a dilemma. Because, bailout followed by the number of terms. One of them is cutting state expenditure. In this situation people usually rebel. "Subsidy education, unemployment, food and fuel oil (BBM) will be reduced which in fact is not desirable people," he said.
Moreover, the Europeans are accustomed to luxurious living. But, indeed in a swollen debt situation, there is no way other than the bailout. If the debt is too large, the savings should be done. "The choice is not much. Spending cut or taxes raised where the people are not willing, "she says.
In economics, Djisman admit there is nothing at no cost. If a large expenditure, the tax must also be large. If you do not want huge taxes, the debt must be large. "It's just that, as a member of the European Union, the debt must not exceed the terms of earlier, more than 60% of GDP," he said. As a result Djisman firm, Europe's fragile because the country's debt exceeds that limit.
For Indonesia, said Djiman, Europe's debt crisis is not a threat. Because, RI trading partner more with East Asia. Only, there's little or big influence. Because, in some commodities, RI exports to Europe is big enough, such as textiles, coffee, palm oil and shoes. "Indonesia should shift its market to Asia and the Middle East problem is not expected to deteriorate," he added.
So far, the Portuguese government continues to refuse international aid following the resignation of Prime Minister Jose Socrates on Wednesday (23 / 3). Cabinet spokesman Pedro Silva Pereira said the government would continue to oppose the possibility of requesting foreign ***istance. "Our position is clear, rejecting foreign aid," he said.
The Government considers aid can still be avoided. Foreign aid will have serious consequences for the economy. Opposition parties in Portugal refused to support the new tightening policy package announced by the minority Socialist party on March 11, 2011.
Monday, March 28, 2011 08:30
After Greece and Ireland, one by one EU member state must bailout. In Portugal, these conditions force the resignation of Prime Minister Jose Socrates. How fragile the Eurozone economy.
Senior Economist Center for Strategic and International Studies (CSIS) Djisman Simandjuntak said the case in some EU member states was triggered by a breach of the Stability Pact. Among other things, the debt ratio should not exceed 60% of gross domestic product (GDP) and annual borrowings should not exceed 3% of GDP.
According to him, all countries should abide by the euro denominated pact. But, that's who violated the member countries of the European Union called Gypsies (Greek, Italian, Portugal, Spain and Ireland. "Because, its debt was well above the maximum level," he told INILAH.COM, in Jakarta, yesterday .
Based on data from the International Monetary Fund (IMF), in 2010 the ratio of debt to Greece's GDP amounted to 124.9%, 120.1% Italy, Portugal 84.6%, Ireland 82.9%, and Spain 66.3%. "For the moment, Portugal, is one of the countries most affected by the ratio of debt," he said.
Therefore, he continued, is a recipe to deal with macro-economic tightening. The state budget that had to be shortlisted. "But, on the other hand, tightening it just raises the problem of unemployment," said Djisman.
He also explained, the high debt ratio of Gypsies is a problem for the eurozone as a whole because it has the same currency is the euro. Whatever actions taken large debtors, influence on European countries to another. "Thus, countries with high debt ratios is not possible to avoid a bailout from countries with low debt ratios," he said.
Other European countries debt ratios are low, do not want to weaken its currency due to its neighboring countries which have high debt levels. "In fact, every debt crisis, will drag its currency weakening," said Djisman.
If the euro continues to weaken, the wealth of German, French, Dutch and other European countries are also eroded. Purchasing power was weakened and the level of consumption tends to fall. "National income would weaken the country concerned. Would not want to be the bailout of the debtor countries that, "he said.
But the bailout still leaves a dilemma. Because, bailout followed by the number of terms. One of them is cutting state expenditure. In this situation people usually rebel. "Subsidy education, unemployment, food and fuel oil (BBM) will be reduced which in fact is not desirable people," he said.
Moreover, the Europeans are accustomed to luxurious living. But, indeed in a swollen debt situation, there is no way other than the bailout. If the debt is too large, the savings should be done. "The choice is not much. Spending cut or taxes raised where the people are not willing, "she says.
In economics, Djisman admit there is nothing at no cost. If a large expenditure, the tax must also be large. If you do not want huge taxes, the debt must be large. "It's just that, as a member of the European Union, the debt must not exceed the terms of earlier, more than 60% of GDP," he said. As a result Djisman firm, Europe's fragile because the country's debt exceeds that limit.
For Indonesia, said Djiman, Europe's debt crisis is not a threat. Because, RI trading partner more with East Asia. Only, there's little or big influence. Because, in some commodities, RI exports to Europe is big enough, such as textiles, coffee, palm oil and shoes. "Indonesia should shift its market to Asia and the Middle East problem is not expected to deteriorate," he added.
So far, the Portuguese government continues to refuse international aid following the resignation of Prime Minister Jose Socrates on Wednesday (23 / 3). Cabinet spokesman Pedro Silva Pereira said the government would continue to oppose the possibility of requesting foreign ***istance. "Our position is clear, rejecting foreign aid," he said.
The Government considers aid can still be avoided. Foreign aid will have serious consequences for the economy. Opposition parties in Portugal refused to support the new tightening policy package announced by the minority Socialist party on March 11, 2011.
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