The financial market is going through a stressful period. If you want evidence, take a look back at last week. The U.S employment data showed that the recovery was not even as strong as they thought. When the new Hungarian government, while explaining why they would not be able to keep their election campaign promises, said 'we might end up like Greece', instead of saying 'we took over a wreck', everybody was worried sick. It was confirmed in the G20 meeting that there still is not a consensus on what the new-normal is. This is sad, of course. There still is not a wide unanimity that the new-normal would be different than it used to be. When the diagnosis is not unanimous, neither is the treatment. The markets are in such a mood that it seems as if they are guerillas combatting on enemy fields. But why so? Have you ever thought about what the issue really is? Let's think about it together.

Yesterday there was a consensus. Our globe all around was surrounded with an unusual threat. So, an unusual reaction was needed. Measures needed to be taken all together in order to limit the recession. Bad times were to come if the damage in the balance sheets of the banks weren't repaired. What needed to be done was raising public spendings and granting public guarantees, without taking into consideration the condition of the budget. Thus, it was done. Budget deficits grew larger. The problem was overcome in the meantime. The recession was limited, then, however, a relaxed mood descended upon us. It was as if we had reached the field we were used to, as if we knew what we were doing. But that was all wrong. There was no consensus on what was to be done. We were just overly-excited and happy because the recession was limited.

What we lack now is consensus; exactly what needed yesterday. And I think this is what bothers the market actors. On one side, there are those who defend that the main problem is, the tightening today, what was loosened yesterday. On the other side, there are the ones who think a fiscal contraction which neglects growth, is not possible in these conditions. Just last week, while Angela Merkel, the Chancellor of Germany, made a statement which put her in the first group, Geithner, the United States Secretary of the Treasury, acted as the spokesman of the second group. What the G20 meeting resulted with was a support which was prevailing to both groups equally. Sort of like, 'Growth is important, and fiscal contraction needs to be done, too.' What does this mean? There is no consensus on what needs to be done, yet. This, is not good. The minute you start thinking about the quality of the new-normal, it becomes more clear why it is not good. Let's put our thoughts about this period, in order.

First of all, the new-normal is a period where the decisions of the governments are important. Rather than being a period in which the markets operate freely, it is one where public decisions will be of importance. Let's remember. Everything was liberated in 1870's. Then we got into a fight with the globalization. There were two successive grand wars at the only known center of civilisation. After 1945, a period of controlled global cooperation was launched. We went through a term of strict contols in which fund transfers from one state to another were highly popular internationally. We entered a new liberalization period after 1990. It is now 2010 and I think we are in the beginning of a new controlled/regulated globalization process period. It is crucial to see the new-normal from this historical point of view. I will explain this in detail for you, some time later. This, is the first point.

That being said, the second point should be added immediately; the new period brings the need of a new controlled globalization, but this time, figuring out how to manage the process is more complicated. Now the picture does not consist only of one great hegemonic power and a number of countries. The Northern Atlantic is now far from being the issue of the decision process on what kind of an agreement ground would be provided for it. Besides, as last week has also proved, there is not a consensus even on the two sides of Northern Atlantic. G20 needs to function properly and the political reactions towards the new-normal need to be considered. Coordination is now even more important than it used to be; a common ground is now more meaningful. This is actually what makes today's economic policy design this sensitive to political risks. We, all together, must decide what to do and set our priorities. This is why the G20 meeting in Canada is so important. A global reaction and a global policy design is needed for a global matter. However, we don't know how to put that into practice. Even the amendments to render the decision-making structure in IMF consonent to G20 are not complete yet, let alone the design. The distribution of votes that was decided upon at the World Bank is hard to believe. Even the theoretical infrastructure is not ready yet. We do a lot of talking but it doesn't seem like we take any action. Plus, no one seems to be the owner of this work. Let this be the second point.

I guess the third point should be this: If even the infrastructure of global cooperation doesn't exist, it means that this matter is open to political risks caused by singular countries. For instance, we are still waiting for the decision of the Constitutional Court of Germany on the question 'Is the 750 billion Euro support package in compliance with the EU Legislation?' Before that, we were waiting for the election results of North Rhine-Westphalia State. Isn't this an increasing political risk? It is.

Here is the fourth point: There isn't any chance for a belt-tightening policy, which doesn't take growth into consideration, to succeed. What is expected? You tighten the belts, your money depreciates. Your exports increase, your economy gains strength, the growth accelerates, the ratio of debt to national income decreases. However, today, in this environment, it seems the odds for these to come true are not high. A belt-tightening policy that neither takes improvement in competitiveness, nor foreign trade demand and impacts on employment into consideration, doesn't seem likely to succeed on its own. The increase in confidence needs to have a more real and reliable foundation, this time. The perspective 'That period is over, now it's time to grow, so let's tighten the belts from now on' seems a little too naive when faced with the realities of life. The growth process is still in need of public support.

Let the fifth point be a question: Under these circumstances, would the 2010 growth be 6.8, in Turkey? I assume those were the forecasts of another new-normal possibility. There was a period of increase in growth forecasts. But now it's over. Right now, we're in the beginning of a period of reduction. Wasn't it just like this, last year? There was at first a reduction contest, and then came a raising contest. The name speaks for itself, what we're going through is a period of ambiguity.

In order to be able to plan the following round of the game, first, the balls hit in the current round must stop moving. Isn't that how it goes in billiard? Let's just hold on for a while.

This commentary was publishedin Referans daily on 08.06.2010