There is a serious discussion in the international world of economics, nowadays. Are you following it? There are the ones that support the Chicago school, like Raghuram Rajan, on one side, and the ones who think like Paul Krugman, on the other. Looking at what's happening in Europe, there are the ones saying 'Let's tighten the belts' on one side, and the ones who worry 'If everyone tightens their belts, what will happen to growth, how will these debt stocks look like?' on the other. The governments of Germany, Greece, Portugal, Spain, Ireland and Italy on one side, the ones of United States, and assumingly, France, on the other. The question on everyone's minds is, I guess, the exact one on the heading of this article: Is belt-tightening in one country the same as doing so in the world's greatest economy?' No, it's not. Will the new-normal be a usual period like the old-normal? It will not be a usual period. Talking about usual measures in an unusual period is meaningless. So, what should be done? Those of you who wonder are welcome down the article.

The ones who support the first school base their ideas on 'the original sin' principle, from the Christian mythology. Isn't one of the best parables of this mythology 'the Ant and the Grasshopper'? It is. There most certainly comes a time when the ones who have led a sluggard life doing nothing have to pay the price of their sins and they most certainly pay this price. This is the main theme. If you ask me, this, exactly is the mythological root of the 'let's tighten the belts' ecole of the ecenomic theory. What always catches my mind in this situation is that old Chinese proverb. What did it say? 'As you climb the mountain, the perspective changes.' The situation is the same. When the appropriate strategy for separate countries is turned into a political prescription that everyone applies all together, the results change dramatically. What once was a remedy now seems like a poison. The matter having become like this, the perspective needs to be changed. Let's examine.

The phase we're going through is actually quite exciting, professional-wise. The political positions that we're used to need to be revised again and again. The perspective alterations that didn't need to be done yesterday are needed to be done today. Did you have a look at the 'debt/national income' tables prepared for Greece? In 2008, the public debt stock that was approximately 99.5% of the national income, rises to 115%, also affected by the crisis, and then hits 150% when the interest rates increase drastically along with the 'Greece is in trouble' discussions, in 2010. When? During the period where European Union recovery package was discussed. Greece takes measures but it doesn't help. The debt ratio to national income, which is the indicator of the fever of the patient, keeps increasing. Turkey's indicators are stable in the same period, while theirs keep increasing. In the meantime, Greece government takes measures. The pace of increase of national income, i.e. growth estimates are being revised down. Growth doesn't reduce the ratio of debt to national income. It gets harder and harder to carry the debt. Now, can you tell me, is it a financial irresponsibility of Greece that increased the Greek public debt/national income rate from 100% to 150%? Or is it the indecisiveness of the EU? Or maybe the financial market actors? This is the first point to be kept in mind while thinking of a solution to the problem.

Here is the second point: Greece might be able to tighten the belts on its own and limit its own growth rate. But what would the impact of all European Union countries' starting to tighten the belts all together be? In such a case, the world's second greatest economy would be of no use in the after-crisis recovery process. On the contrary, the ones who can't quickly recuperate would not carry their problems on their own and make the rest of the world carry with them, due to the relative drops in export demand. Would such a thing be good for Turkey? No, it wouldn't. For USA? No, it wouldn't be good for USA, either. It is bad for the entire world if the EU countries are to tighten the belts all together. This is exactly what Paul Krugman meant by saying, 'Let's punish China and Germany for their selfish political perspectives'.

Here is the third point that should be drawn from this: the EU needs to have a political perspective that pays attention to the entire world. Similarly, it would be better if Turkey, who is a part of the G20 mechanism, starts developing a political perspective that takes not only Turkey, but also the countries like Turkey, as a whole, into account. Germany's attitude which pushes growth in the background and puts stability forward is not right when the well-being of the global recovery process that we happen to be in, is concerned. Turkey needs to demand the new financial support packages in the EU countries, the fast debt-reconstruction process and that the financial problem be solved immediately with a common financial measures mechanism. Just like I mentioned last week, to demand that the EU recovery package be put into action as soon as possible, is the main priority of this period. And this, is the third point.

Otherwise, the deceleration in the European economies will affect Turkey in three different aspects: The first one is the constant appreciation of the Turkish lira faced to Euro, which is not good. The second is the slowing down of the recovery of export performance due to the decrease of the import demand in Europe, which is also not good. The third one is, fund flow. It would be beneficial to expect a positive effect from this one, at first stage. But the approaches can change. What needs to be known is this: There is no 'local' solution to surviving this problem. The solution needs to be sought in an international scale. Turkey has certain tools such as the UNSC and G20 but its voice is not loud enough to be heard in these platforms. However, it should be.

With the changing perspective, this is what I see: the public debt issue, in this period that we're in, can only be solved by cooperation and the recovery package, in the short term, not by belt-tightening. What the system essentially needs is medium and long term belt-tightening measures but short-term recovery packages.

This is what it's all about: With the forest burned down completely, there will be nothing left to be burned. In the meantime, the fire started in order to control the actual fire, should be prevented from burning down the whole forest. In that case, this measure is not actually a measure.

This commentary was published in Referans daily on 15.06.2010