The Kapali Carsi

Greece, Europe and Turkey; Euro, Drachma and Lira

I had two columns in the Hurriyet Daily News about the Eurozone crisis in the past few weeks.

The first was titled Dra(ch)matic end to the Greek tragedy, with one of my characteristic word plays in the title:

Receding fears of a Greek sovereign default lifted markets on Friday even though not all the details on the Eurozone’s new €130 billion bailout package have been resolved…

This is the intro. to the column. You can read the whole thing here. Basically, I was arguing that Greece will probably have to leave the euro, not because it would be in its best interest to do so, as some have been arguing, but because the current economic program is not sustainable. My conclusion was not really original: Many people, from my blog host Nouriel Roubini to market economists and academics, reached the same conclusion right after (or before) I had published my column on February 20th. The situation has not changed much since then. In fact, the IMF’s Staff Report on Greece, which was published on Friday, makes for quite grim reading. The whole thing is more than 200 pages, so if you’d like a quick summary, Peter Spiegel of the Financial Times Brussels blog is providing the highlights. I would agree with his conclusion that the Fund seems to have thrown in the towel for Greece.

BTW, a related issue is whether fiscal consolidation will result in debt sustainability and growth. Turkey is one of the few well-known cases of an expansionary fiscal contraction, which you can read about in my aptly-titled column Turkish Lessons for the Eurozone Crisis.

Anyway, I felt guilty for my depressive column:), so I jumped on the chance to “make up” when the World Bank released, in conferences in Ankara and Istanbul, a rather optimistic report on Europe:

Turkey lags behind its peers in terms of the number of think-tanks, but the few out there are doing a great job. I spent the better part of last week attending conferences about Europe’s fate organized by local policy institutes.

This is the intro. to the column. You can read the whole thing here. The report is arguing that the European growth model has its advantages, and therefore should not be discarded just because of what happened in the last couple of years. In the Q&A, several people criticized the report for completely having ignored the issue of the currency union, which is, according to Paul Krugman among others, the main reason for the Eurozone’s woes. But I think the most interesting parts of the report were intra-Europe comparisons, which highlighted the stark differences between the Eurozone countries. To sum up, northern Europe (basically the Scandinavians) is on par with global leaders in terms of innovation, human capital, business climate  and the like, whereas the South has really fallen behind (central Europe is marginally behind). This is not exactly a “Eureka conclusion”, either: For example, Roubini Global Economics’ own Economist Meg had a very graphic account of the bad business climate in Greece, which was widely circulated around the time my column came out.

Since he was presenting in Turkey (and he is one of the two main authors of the report), World Bank Turkey country director Martin Raiser was kind enough to add Turkey to his “comparison charts”. Worryingly, in most of his indicators, Turkey fared worse than Club Med. This is not surprising to anyone who follows the Turkish economy closely, either, but could be a surprise to someone who has “bought” the “Turkish success story”, mainly based on the impressive growth of last year (to be released in 10 days, but will probably be around 8 percent). If you are willing to adopt a longer term perspective, it is important to note that the Turkish stability story of the past decade rests on macro developments alone. As I have argued in my Daily News columns several times, those macro reforms have unfortunately not been followed by micro ones.

In fact, an expat. journalist who had forwarded me Meg’s column noted that the Greek restrictions to businesses reminded him of similar arrangements that were in effect until the 80s in Turkey. While Turkey got rid of some of these “business hindrances”, many still remain, as illustrated in World Bank’s Doing Business rankings. But what really amazes me is that Meg’s bookshop example could exist in a country that has been in the Eurozone for over two decades…

13 Responses to “Greece, Europe and Turkey; Euro, Drachma and Lira”

ChristosMarch 22nd, 2012 at 2:46 am

Dear Sir,

Your comments on the future of Greece are very wrong. As you may or may not know, trillions of dollars worth of gas and oil have recently been found off Cyprus and in many other areas off the coast. In March of 2012, oil exploration companies have been invited to bid on exploration contacts. This will change the economy in the region substantially and Greece will again rise from the ashes as it has done many times before. Further enhancing the situation, Greece has the largest merchant shipping fleet in the world and would quickly be able to sustain the increased oil trade.

The sad reality is that It's unfortunate that the Turkish media still spins rhetoric against Greece in this day and age. Greece will always be in Europe, something Turkey with its poor human rights record and lack of judicial due process will never accomplish.

The players in Europe know that recent gas discoveries will pay off big. There was even a allocation in the bail-out for further exploration that has gone unoticed. Nevertheless, it's so called journalists like you that distort realty with biased comments geared to a very paranoid audience in your country that show your fear of a resurgent and dominant Greece coupled with Turkey's lack of national self esteem. The reality is you have larger issues on your plate with the Kurds, Syrians and Iranians to focus on tiny little poor Greece. Oh yes one more thing, all those wonderful classical ruins that are scattered throughout Turkey, guess who built them many years ago? GREECE!

So go censure your journalists, cover your women and continue to pray in a famed renamed Christian Orthodox Church converted to a mosque. As they say here in the USA, the best Turkey is fried in Grease.

JamesMarch 28th, 2012 at 11:45 am


Your attack on Turkey reveals your biased and traditional Turkish bashing that some Greeks are constantly engaging in to reveal your nationalistic ignorance. Sounds like jealousy that the Turks are faring much better than the Greeks at this time. By the way, the Greeks did some amazing work here in the past, of which the architectural ruins bear witness to. But you would do well to remember and acknowledge that the Turks built on this heritage and created architecture that included Greek influence and made them much more beautiful. Also, the Turks have been helping the Greeks through this crisis, and the only Greek banks that are doing well are the ones who have invested in Turkey (Finans Bank, etc..) Your ingratitude speaks volumes about a contemporary Greek inferiority complex.

DiranMMarch 22nd, 2012 at 9:19 am

Christos seems very muddled in his views. Energy reserves are in Cyprus, not Greece (as least so far proven reserves)! Cyprus is an independent island state, as premeditated by Zurich Accords. The Greeks abandoned the idea of "enosis" years ago. The Greek political leadership never understood the strategic position of Cyprus and the importance of unification with Greece. They have no coherent national vision. For them the EU is everything, sort of like an addict on heroin. They stopped thinking for themselves years ago.

DiranMMarch 22nd, 2012 at 9:19 am

Generally over the last 30 years, the Turks have greatly outperformed Greece economically and risen substantially in geopolitical power. They have consistently had a more effective and intelligent political leadership. Turkish political leadership rises on ability and merit, not on the caste system in Greece based on blood ties and political families. Turkey developed a new generation of entrepreneurs when the dream of very Greek was to become a civil servant or to find a way to live off the Greek public sector. The results speak for themselves.

Turkish GDP is at least three times Greek GDP. Turkish exports are five times the Greek exports. Turkey is a sovereign state with a national currency and central bank. Its international relations are based on self interest and mutual respect. It is a member of NATO, but its biggest export market is Russia. Greece is a vassal state and effectively a colony of the EU.Greece by contrast is a vassal state and colony of the European Union. It trembles everytime Brussels issues a new ultimatum. Economically it belongs to a greater Deutschemark zone, where the Germans have economic hegemony.

DiranMMarch 22nd, 2012 at 9:23 am

Greece by contrast is a vassal state and colony of the European Union. It trembles everytime Brussels issues a new ultimatum. Economically it belongs to a greater Deutschemark zone, where the Germans have economic hegemony. Greece's productive base is in disarray and the country is totally dependent on imports. It cannot survive without life support from Brussels in the way of bailout loans. The Turks have done a good job cherry-picking with the EU, without becoming over-dependent. Greece is totally dependent on the EU and cannot move without their permission on anything.

Sadly, I do not think that Turkey would like to be in the shoes of Greece, a puny EU vassal state with a political leadership, who sees their career prospects in the EU over any sense of patriotism/ Greek national interest and their personal wealth more important than the good of the Greek people.

ChristosMarch 23rd, 2012 at 5:53 am


If you recall Turkey took 3 bailouts in 2001-02 from the IMF.

The country has a corupt judiciary, no democratic institutions, denies the Armenian genocide, coddles dictators, continues to oppress the Kurds, its borderscare burningvand is leaning towards a Islamic theocracy.

Enough said.

JamesMarch 28th, 2012 at 11:50 am

No corruption in Greece! Then why the hell are you bottoming out in a crisis? Greeks never committed genocide in their glory days? No democratic institutions? Why is your government riding roughshod over the will of the people. Your democracy is as much a jokes as the Americans or the Turks or the Russians……

More than enough said.

TobinMarch 23rd, 2012 at 10:07 am

Guys why are you quarrelling? I think that both countries are not good examples for many things either economic or political. Both countries are quite behind in global developments. While Europe lived and the age of enlightenment, Turkey and Greece had still feudalism. The only habit that Turkey adopted late from Greeks is the passion for consumption. Thanks God -or Allah- consumption and private credit in Turkey is raising…
Both countries are the best customers of global arm dealers and they will be retarded and dependent for many more decades….

JamesMarch 28th, 2012 at 11:54 am

The Ottoman centers of learning transmitted the Enlightenment to Europe while she was still in the Dark Ages. All it's bickering takes the focus off of the criminal transnationalist capitalist elite that is raping countries regardless of their politics or religion.

ChristosMarch 24th, 2012 at 3:28 am

Agreed…I guess the old cliche applies here "he who lives in a glass house should not throw stones"

murat tasciogluMarch 27th, 2012 at 8:36 am

the two countries will eventually realise that they are better off when they get together and cooperate..Some greek islands are only few miles off the turkish coast but they import the tomato all the way from Greece..It is not the way that two countries shake hands. There must be first an economical stand up togerher. The greek ferry lines must commence from izmir and some other major aegean ports; otherwise they will be sitting like dull turkeys and will prove to be nothing but an expensive junkyard for the years ahead. People like christos are fun at the uzo table but more sound people will be to the mutual benefit of the either side of the Aegean.