Turkey has extensively discussed the rising exchange rate, high interest rates and concomitant inflation. In fact, we and others know that the Turkish economy possesses the dynamics to overcome this spiral. Aware of the problem, the economic administration is taking the necessary measures and will soon introduce structural reforms. Soon, everyone will see that this situation is actually an opportunity for Turkey.
I think external challenges will push us even further. For instance, just like the Greece issue, the Italy issue is a problem for the EU now; however, it cannot be weathered with “traditional” austerity policies. After all, the basic economic problems of any country can no longer be solved with traditional belt-tightening policies.
Everyone knows that Italian Parliamentary Budget Committee President Claudio Borghi’s remark that Italy should leave the eurozone has strong political and economic justifications. Of course, the EU’s dominant oligarchy, led by Germany, will overlook this fact. Immediately after Borghi’s statement, Italian Economy and Finances Minister Giovanni Tria affirmed his commitment to the German front, saying: “We are all depending on the euro, and we need sound policies to protect it. The Italian government must show that it has a sustainable and reliable budget plan.”
Will Italy be able to reduce its public debt, whose proportion to gross domestic product (GDP) is 130 percent, to reasonable levels? Let us note that this proportion is 28 percent in Turkey. It seems rather hard. Also, it will be very hard for Italy to reduce the ratio of its budget deficit to its gross domestic product to 2.4 percent in 2019. The current policy of the European Central Bank (ECB) and such an overvalued common currency render it impossible. So, the collapse of the eurozone before the EU and the end of the common currency system are some of the worst-case scenarios we will be talking about in the near future. This will undoubtedly push the EU to review its enlargement strategy, and Turkey-EU relations will be shaped according to this new situation.
Central Europe has come to understand that it cannot overcome the crisis without Turkey. Germany’s concern is not limited to migrants, given that the major southern countries, especially Italy, which are moving toward the brink of the abyss, are now the biggest problem facing the region.
As for Turkey, we need to believe that Turkey will successfully carry out a transformation in the economic sphere, like the one it has achieved in politics. The latest inflation data clearly shows what we should focus on from now on.
In September, Turkey’s inflation outpaced expectations and the producer price index (PPI) hit a record-high at 46.15 percent. Coupled with such a huge discrepancy in the consumer price index (CPI), all this tells us that we should focus on different points of inflation than we have focused on so far.
September inflation figures laid bare one of the major problems of the Turkish economy: Monopolistic, oligopolistic and uncompetitive structures and their distorted pricing. This has been one of the biggest problems for economic development and income distribution not only in Turkey, but also in all countries, albeit in different areas and periods.
For instance, in order to minimize the impact of a monopolistic-oligopolistic economy immediately after the 1929 crisis, the U.S. implemented the New Deal program. Should Turkey fail to introduce a program that will remove this structure and the economic distortion quickly, the fight against inflation will remain a vicious cycle. It should be noted that inflation is also a revenue transfer mechanism that runs from the poor to the rich; therefore, the fight against inflation is one of our main starting points. And the most important step we will take in this area is to ensure the functioning of a completely free, competitive and open-market economy.
Even imperfect competition is a dynamic that an economy like Turkey cannot endure in the long term. In this sense, the picture of Turkey’s economy with the latest inflation figures tells us that a basic solution is to create a competitive economy of small and medium-sized enterprises (SMEs).
On the other hand, as underlined above, in order for the EU to elude a second-wave crisis, which is certainly coming with Italy’s problems, without losing its integrity, it needs to resume negotiations with Turkey and change its enlargement strategy soon. Otherwise, if Italy secedes from the union after the U.K., first the euro and then the EU will end – which means the largest global crisis in the history of capitalism that will lead to graver consequences than the 1929 crisis.