[Kajian Post] Spain is in Economic Crisis

Oleh : Tifani Putri Shafira | Trainee Divisi Kajian Kanopi 2012 | Ilmu Ekonomi 2012 

We have been discussing European crisis for a while, some might still not understand what the crisis is and how it will end. The term itself, ‘European crisis’ means that Europe is struggling to pay it’s debt that might be increasing for years. Since European countries are all using the same currency, which is euro, so that the crisis gets worse when it has started in one country. It started with Greece then others European countries follows such as Portugal, Ireland, Italy and Spain.

The European Union (EU), an organization for European trading, already tries to make an effort to overcome the crisis as it started. The organization tries to bail out some of the European counties that are mention above particularly Greece. However, the crisis still unavoidable and even bringing more European countries to be in crisis problem as well. Maybe sometimes we are curious ‘ why the countries cannot erases the debt and just start a new’ as the bank that are lending the money are European banks anyway. The banks are required to keep a certain amount of assets on their balance sheets relative to the amount of debt they hold. If a country defaults in its debt, the value of its bonds will plunge. For banks, this could mean a sharp reduction in the amount of assets on their balance sheet – and possible insolvency.

Compared to others European countries that also in the crisis of debt, the most difficult one might be Spain. This is caused by a single currency that Spain uses. The Spanish government is already trying to resolve the crisis by several actions, including writing debt limits to the constitution. However, the government is making a false prediction about Spain’s fiscal condition. The government argues that the budget deficit, which reached 8.9% GDP last year must be brought down as soon as possible and the state, also should cut borrowing costs to increases the confidence of borrowing money. As deficits would make people became more careful about where they are using their money and the purposes.

I hope that the European countries can overcome their economic crisis soon because otherwise there may be more and more European countries that are trapped into economic crisis. The worst thing that could be happened is that the European governments might have to change their currencies to make their economic situation more stable and people are starting to believe their government again. This way people would feel more secure ‘playing’ with their money with borrowing and investing. By having people to borrowing and investing money within a country would make that country’s growth increases and so there are more money earned by that country to pay off the debt and the interests.

This economic crisis should also be lesson for Indonesia to avoid the same mistake that Europe made such as wrong predictions and being over-debt as we already in a big debt since ‘ordebaru’ and currently Indonesia is trying to keep paying the interest of the old debt. I concerned that later on the budget in Indonesia would be used more for paying old debts rather than developing the county for future generation.