TEPAV/SAK: “Fiscal Rule is required for sustainable and steady growth...”

İSTANBUL- TEPAV Director Prof. Dr. Güven Sak stated that a cap must be put on government expenditures through a fiscal rule in order to assure sustainable and stable growth. 

TEPAV Director Sak delivered a speech titled "Pace of European Union Enlargement after the crisis" at the panel meeting "Economic Crisis, Lisbon Treaty and EU Enlargement Process" held in the context of the ''Eurochambers Associate Members Committee Meeting''. 

In his presentation, Sak evaluated the PIGS (Portugal, Italy, Greece, and Spain) crisis and said that the global crisis was not the only reason but there were structural problems in these countries. Sak emphasized that in an effort to converge with the rich EU countries, the mentioned countries had to grow beyond their means, which constituted a significant structural problem. Sak stated: "If there is no mechanism to assure fiscal discipline, sustainable growth may have problems. That is what seems to have happened in all of the mentioned countries." Stressing the lack of a stronger coordination mechanism for the convergence process, Sak added "Countries with fiscal problems should obe the rules of fiscal discipline." 

Sak underlined that Turkey also suffers from similar structural problems. Stating that the issue for Turkey should be to achieve sustainable and stable growth, Sak said that it is currently unlikely to increase domestic savings or increase the tax base and collect more taxes to cope with this issue. Touching upon the fact that choosing to improve tax revenues rather than limit government expenditures in times of economic contraction lead to a significant structural problem, Sak added: "This also impairs permanently the competitiveness of Turkish firms." Sak argued that a fiscal rule to be introduced in the coming period should put a cap not only on the budget deficit but also on government expenditures and maintained that what Turkey needs in the long term is achieving a more predictable and fair tax system promoting formal economy.