Unless newly established Greek and Italian governments are successful in addressing the countries’ current economic problems, the European economy will enter a serious slowdown period and further negatively affect the Turkish economy, said Kemal Derviş. “If the Greek and Italian new governments are unsuccessful, there will be serious a slowdown in Europe; [economic] growth will stop, while lasting uncertainties and unemployment will probably rise. If this happens, the whole world will be affected, and likely, Turkey will be affected too,” Derviş, vice president of the Brookings Institute and former Turkish economy minister, told the Anatolia news agency in a recent phone interview in New York.
Possible negative effects will not impact just Turkey in particular, Derviş said, but the EU is an important trade partner for Turkey as it is for many other countries. “If the crisis deepens it will affect the global economy, which will in turn affect the Turkish economy. The latter has already started to be affected. The Brazil and U.S. economies will also be affected,” he said.
Turkey’s diversification of trade will help to cope with effects of crisis, Derviş said. The country’s economy was flexible and diversified, thus it would not be dependent on the performance of the European economy. But “[the Turkish economy] is still anyhow linked to the EU’s,” said Derviş, who is also member of the Sabancı University Advisory Board.
European economy not that bad
Eurozone economies are in serious danger due to the present sovereign debt crisis, however, when looking at the European Union economy as a whole, the situation does not appear to be that bad, Derviş said.
“When looking at the eurozone as if it were one country, one notices the per capita debt is much lower than the ratio is for the United States; the current account deficit is also very small,” Derviş told the Anatolia news agency in a recent phone interview.
Some U.S. economists described the situation in Europe as “hopeless,” Derviş said, but “actually, there is nothing like that. The German, Dutch, Finnish and Austrian economies, as well as the economies of Denmark and Switzerland – although these two are not in the eurozone – are very strong.”
The real problem in Europe is the differences between the Irish and Mediterranean EU economies and the rest of the countries, “not because Europe’s social model is deficient or because the European economy as a whole is bad,” Derviş said. The way the EU will manage such imbalances was thus crucial, he said.
A common currency and monetary policy would not fit with independent fiscal policies for individual eurozone countries, Derviş said. “A currency union needs a common fiscal policy as well as a single Central Bank and monetary policy. A very important question stands in front of the EU now: Are [EU member states] willing to integrate further or not?”
Tight fiscal policy must be accompanied with elimination of bad practices such as tax evasion or puffing up of costs in public tenders, and countries with difficulties must also go through structural reforms that encourage economic growth, Derviş said.
The International Monetary Fund must also provide more financial aid for southern European countries to move out of their crises, which means it must increase its finances, he said.
Kemal Derviş was appointed as Turkish Economy Minister after the 2001 economic crisis and prepared a successful economic program to get the country out of crisis.
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Source : hurriyetdailynews.com
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