Credit Crisis

Well, as we all know the global economic crisis is confronting the Netherlands with a major challenge. Jobs and incomes are under pressure, companies are in difficulty and the national debt is rising fast: for example in 2009 the public debt in 16 european countries in the eurozone raise with an average of eight per cent, according to measures that have been made by the European Office Eurostat. In the Netherlands there is an increase of 33 per cent compared with 2008. So, the Dutch public debt increased with a third in one year and other eurozone countries didn’t.
Because of this, the government has made a stimulus package for 2009 and 2010 that is worth a total of six billion euros. According to Mr. Balkenende (prime minister of the Netherlands) this package will stimulate economic activity and ensure that as many people as possible keep their jobs. Should the government interfere?

By interfering in the credit crisis, the government disables the market forces and therefore the competition of the financial market. Competition leads to more efficiency. More efficiency stands for better quality of the product en lowering of the costs. The result is a healthy market with economic growth. Therefore a stimulus package wouldn’t be needed if the government let the market force do its job. But on the other hand the crisis would be bigger if different banks like ABN AMRO really did collapse.
Nevertheless, an effect of government interfering is that they will tax us more. Because of the high taxes, we spend less. If we spend less companies will loose revenue (some companies will either move to another country or close down) which eliminates jobs. It will be a vicious circle.

However, Temporarily cutting working hours (a measure of the government right now) means that people are less likely to lose their jobs, since companies did not need to pay the fulltime salary. Employees can count on a temporary unemployment benefit in order to compensate for the salary reduction. By offering secured loans, the government made sure that it is possible for people to spend money and thereby revive the economy.

With the Dutch state as a welfare state, we all want the government to help us. We want money to provide us in our healthcare. We want measures from the government if someone can illegally go to the security system of one of our palaces. We want an answer from the government when they don’t want to listen to the people. Therefore, I think that the government prevented us from a even bigger crisis than what we are in right now!