Independent and cutting-edge analysis on Turkey and its neighborhood

The trilogy of high fiscal deficits, a weak currency and an open capital account lied at the heart of Turkey’s boom-bust cycles in the past decade. Now that the acute phase of the last crisis is over, and most of the dirty work related to one-off balance sheet adjustments associated with the sharp jump in the exchange rate has largely been worked out, one may be tempted to (re-) think through Turkey’s monetary options. it appears that Turkey has essentially two paths to follow going forward.  One is to maintain the current regime of floating exchange rates, and soon to complement it by a rapid switch to IT.  The other is to take a short cut and “import stability” by adopting the currency of an anchor block as soon as possible.  As to the latter, “Euro” pops us as a natural candidate, given the strong trade links between Europe and Turkey, combined with Turkey’s broader ambitions to eventually join the European Union. The author feels that adopting the Euro would be a smart way out for Turkey on economic grounds, provided that European Union also acts reasonably cooperative. But aside from economics, one major issue remains to be resolved.  The idea of giving up one’s own currency is not a very appealing one, and surfaces almost everywhere as a major issue of “national sovereignty”, including in more advanced countries.  Turkey is no exception, and the proposed adoption of an anchor currency is likely to be contested on nationalistic grounds even if a broad agreement is reached on its economic benefits.

Please click here to read the text in full

CONTRIBUTOR
Murat Üçer
Murat Üçer
From the Desk of the Editor Over the last couple of years, Turkey has weathered multiples storms in close succession: two general elections that took place in a polarized political climate, an escalation of the Turkey-PKK conflict, a crisis with Russia, the 2016 failed coup attempt followed by state of emergency measures, and the continued threat of terrorist attacks. The aftermath of the constitutional referendum in April...
STAY CONNECTED
SIGN UP FOR NEWSLETTER
TWEETS
FACEBOOK
PARTNERS