Any bright spots on the bleak economic landscape?

Europe is starting to buckle under the strain of the economic crisis as one doom scenario leads to the next. The spectre of a forced exit from the euro looms large. But do we really have cause to be so gloomy? Are there no winners in the present bleak economic landscape? Radio Netherlands Worldwide put four simple questions to three leading Dutch economists.

1. Are you positive or negative about the future?

Rick van der Ploeg:
"I’m fairly pessimistic about the European economy. It’s quite likely that Greece will be forced out of the eurozone. The Greeks will then have huge debts in euros which they’ll have to pay back in a currency that’s worth far less. Spain is also on the brink. In the Netherlands, the economy will be hit hard by a real estate crisis. On the other hand, I’m positive about countries like Brazil and China – their economies are soaring."

Harry Huizinga:
"Negative. Europe’s growth will remain very limited for the foreseeable future which means that other issues, like the debt mountain, will not be resolved for a long time. As things stand now, Europe’s economic problems cannot be overcome."

Frank Kalshoven:
"I’m quite positive long-term. But it’s essential that government debt, as well as debt at local government level, in companies and even within households, gets paid off. That means economic growth will be reduced – economies may even shrink - as a result, while unemployment will rise. But if we manage to get through it, we can start building something more lasting around 2016 or thereabouts."

2. What is the biggest problem that needs to be overcome? How will we manage to do it?

Van der Ploeg:
"The bank crisis – all that reckless lending and unstable investments by bankers and the public. The big challenge is how to get out of it. The problem is that the message hasn’t quite gotten through to Dutch politicians that Europe is no long a role model to follow."

Huizinga:
"The great obstacle is the huge debt – national debt, debt in companies and in households. That makes the problem unsolvable. The ultimate solution would be to allow high inflation in Europe, but the European Central Bank is against that for the moment."

Kalshoven:
"Debt reduction is the greatest problem and will be a painful process. Recent election results across Europe and social unrest in some countries indicate how the public feels when governments start penny-pinching on a massive scale. But the worst has yet to come – we ain’t seen nothing yet. So what are we going to do? Fall, then get up again. There will be many discussions and much political wrangling about this subject; battles will be fought."

3. Who will be the winners and who will be the losers?

Van der Ploeg:
"The winners are first-time home buyers – young people who will have access to the property market because of falling prices. They’re in luck, you might say. The losers are people who paid too much money for their investment, for example, older people who bought their house at a high price and who are now in a negative equity situation."

Huizinga:
"There are no winners, only losers. It also depends on the solution. If inflation rises in Europe, then you could say that the southern countries are the winners because their debt will be reduced and they’ll become more competitive."

 Kalshoven:
"No country benefits from the crisis. That is an important lesson in all this – it is in every country’s interests that its neighbours enjoy prosperity. China was perceived as an economic threat to Europe. But if things are going well with China, then Europe follows suit. Now that bad times have hit Europe, you see that China’s economy is slowing down.

Some businesses have benefited from the crisis. In the Netherlands, fewer people are going abroad on holiday, which means business for camp site owners and people in the tourist industry at home. The biggest losers are people who lose their job, especially if they’re young and have just bought a house. Then, you come into a spiral of financial woes."


4. What is the impact of the economic crisis on you personally?

Van der Ploeg:
"I don’t feel it that much. I’m a civil servant who gets his salary at the end of each month. I live in London and the value of my house is rising. I also have a flat in the Netherlands which has gone down in value. So, my books are balanced you might say. However, my pension will be less than originally thought."

Huizinga:
"The effect of the crisis on my life is minimal. When VAT in increased by two percent, I’ll have less disposable income - like all Dutch people."

Kalshoven:
"Personally, I don’t really notice much difference. The returns on my pension fund are less than I had anticipated. I’m worried about my daughters, though. They’re in their final year of college and it’s a very difficult time to be entering the job market."

(jn)