Question

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Why do u think Philippines should lend money to the European Countries which costs 1 billion dollars because of financial crisis ?

Answer 1

I personally don't think anyone should lend money to the EU countries, because you don't cure alcoholism by giving the drunk just one more drink. (In this case, the EU countries are "drunk" on sovereign debt.)

But the argument for anyone to do so is that it might stave off an economic collapse that would disrupt international trade. So, for example, if the Phillipines lent money to Spanish banks, the Spanish banks might not collapse, which means Spanish firms and people might continue to buy things made in the Phillipines -- eventually paying the money back with interest, and meanwhile keeping demand up for Phillipine export goods.

According to the US Dept of State, approximately 27% of the Phillipines GDP is exports, so the export economy is very important for the Phillipines. Furthermore, as it happens, the major countries to which the Phillipines export more than they import -- so these are countries that produce a net inflow of cash to the Phillipines -- are France, Germany, the Netherlands, the UK, and the USA. At least the first four are strongly affected by any problems in the EU, and a European collapse would mean that the Phillipine economy would lose important customers.

Answer 2

Although I should also point out that $1 billion is a drop in the bucket, relative to the financial crisis in Europe, and all by itself could be expected to do approximately zilch. If the EU is to be saved by lending (which I personally don't think it will be), it will need far more than $1 billion. $1 trillion is more like it.