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    Ercan Kumcu: What isTurkey doing amid the global financial crisis?

    Hürriyet Haber
    24.10.2008 - 11:30 | Son Güncelleme:

    The impact of the global financial crisis is gradually on the rise in Turkey in recent days.

    The trend of foreign currencies is an indicator of this situation. In any case, the developments that do not affect foreign currencies in countries like Turkey are not notable.

     

    The Turkish lira fell 30 percent against the euro-dollar basket by mid-week, compared to the average currency prices of last month.

     

    This shows that we need to be more careful.

     

    The declining national currency is not only our problem. The currencies of all emerging countries listed in the same group as Turkey are also losing value. Some of these countries have turned to the International Monetary Fund (IMF) for help and some are already on the verge of finalizing a program agreement.

     

    TO KNOW WHAT TO DO

    The answer to the question, "What are we doing under these circumstances?" is not clear. We, as Turkey, prefer good intentioned statements aiming to ease the tension in the markets. Turkish society is not aware of the discussions going on behind the scenes.

     

    It is still unclear what course of action we will take with the IMF. In this time of crisis, even knowing when an IMF deal would be reached could ease the markets to some degree. Of course, the situation is worse if we categorically do not want relations with the IMF.

     

    The government says "we can also inject liquidity into markets if needed." It is positive to hear these kinds of remarks, although what they are saying is unclear. Which, and by who, would this liquidity would be injected? If the central bank has such a plan, the markets want to hear about it.

     

    The government also aims to attract the funds held by its citizens in overseas accounts back to Turkey in an effort to provide foreign currency liquidity. Also, it is claimed that the foreign debt of the private sector, which amounts to almost $150 billion, is not Turkey’s foreign debt but the bosses' own funds. And then an amnesty is introduced to encourage the return of these funds to Turkey. How many times can we bring the same funds into the country?

     

    Most countries have expanded the extent of their deposit guarantee systems. In Turkey, it is said that no problem exists and that no action is warranted. Following the practices implemented in Europe would lessen the possibility of problems occurring in Turkey.

     

    Everyone wants to see the light at the end of the tunnel, but the fog is intensifying making it impossible to see.

     

    REACTIONS IN THE COUNTRY

    Requests are being made to find new funds to be injected into companies, and for credit for companies to not be cut.

     

    Where will these funds come from? Even if these funds are found, lenders will not approve its distribution to companies directly from banks. There can be no suggestion of excluding the banking system. And banks would regulate their relations with companies according to their balance sheets.

     

    It is also suggest that in line with developed countries moves, our central banks should also cut interest rates. What would happen if this action is taken? At a time when short term interest rates fall, and treasury bonds interest rates increase for completely different reasons, would companies have access to cheaper credit from banks?

     

    I think we need to consider the situation more seriously. If not, the crisis we import will spread to the components of the country’s economy and we would be faced with our own crisis. It should not be forgotten that these economic components have not yet reacted to what is happening.

     

     

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