Former head of the UN Development Program (UNDP) Kemal Derviş says EU members must understand that they need to push for a further pooling of their national autonomy to save the euro from a likely collapse in the medium-term.
In remarks to the Anatolia news agency, Derviş, who also served as an economy minister in Turkey in the early 2000s, underlined that the present difficulties the EU faces are due to of imbalances between the union's 27 members and their these members' ability to collectively address the present debt crises in some countries of what is credited as one of history's most successful peace projects that reconciled western European powers following World War II.
The EU evolved into its present form of 27 members that have common policies in many fields, including agriculture and commerce, from a steel-and-coal community of six countries in the early 1960s. Of those 27 members, 17 have also come together under the umbrella of the eurozone, a single currency area where the euro is used as a common currency.
However, member states still follow their own national fiscal policies which, for many economists, including Nouriel Roubini of the prestigious New York University’s Stern School of Business, are endangering the future of the euro.
“Once there is a common currency, there is also a need for a common fiscal policy and central bank and monetary policy that completely protects the region. You have a common currency, but those who use it develop separate fiscal policies. That will not work,” Derviş is quoted by Anatolia as having said, joining the chorus of experts who share this opinion. “Now there is a very serious question before the eurozone: Do you or do you not want to further integrate? If the leaders in Europe can create support for it, getting beyond political processes and their people, then the problems will be solved,” he said, adding: “But if they cannot do so and insist on remaining nation states, then it seems very difficult for the euro to survive in the medium-term.” Derviş is currently the vice president and director of the Global Economy and Development program at the Brookings Institution based in Washington, D.C.
Derviş’s remarks echo those of European Commissioner Jose Manuel Barroso and German Chancellor Angela Merkel. In a commentary for The Observer newspaper on Sunday, Barroso said: “As we witness fundamental changes to the economic and geopolitical order, Europe needs to advance together or risk fragmentation.” He added: “The dynamic of globalization in financial and economic terms, but also in geopolitical terms, confronts Europeans with a stark choice: live together, share a common destiny and count in the world or face the prospect of disunity and decline. In this defining moment, we either unite or face irrelevance.”
Addressing the members of her conservative party gathered for their annual convention in the eastern German city of Leipzig, Merkel also underlined that the only solution to EU’s present troubles is for it to become a union of more integrated members. “We must develop the European Union’s structure further. That does not mean less Europe, but more. That means creating a Europe that ensures that the euro has a future,” she said with unusual passion.
Cooperating with the International Monetary Fund (IMF), the EU has already bailed out Greece, Ireland and Portugal. However, the over $500 billion earmarked for these countries has not proven effective in calming market worries surrounding these three -- particularly Greece, where successive governments have misled EU authorities by providing them with inaccurate statistics concerning their budget performance and public debt levels. However, all these countries recently took the back seat when the borrowing rates of Italy -- whose public debt is way over its gross domestic product (GDP) -- insistently remained at levels deemed unsustainable by most economists last week.
‘Turkey to be affected just like any other economy’
As part of his remarks to Anatolia, Derviş also evaluated how the Turkish economy will be affected if the present problems in the eurozone get worse and perhaps result in the collapse of the single-currency area. “If the new governments in Greece and Italy are not successful, then it is possible we will see economic growth completely stall and unemployment increase. And if that happens, the entire world economy will be affected -- so will Turkey. But we cannot say there will be a particular impact on the Turkish economy,” he said, adding that while the EU is an important trading partner for Turkey, it is losing its significance to other markets as Turkey seeks to diversify its clientele for its exports to areas such as the Balkans, the Middle East, Central Asia and Africa.
Similarly, most experts agree that the Turkish economy will feel the chill of such turmoil in the short term like any other economy around the world, but it will weather the storm and resume its strong growth performance not long after the possible crisis’ immediate impact. The Turkish economy already proved it has the capacity to recover quickly from a global financial crisis as the country’s GDP grew by almost 9 percent in 2010 after it fell by nearly 5 percent a year earlier because of the global economic turmoil triggered by the US credit crunch. Further accelerating its performance, it became the fastest growing economy worldwide at an impressive 10.2 percent for the first half of this year.