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Victoria Mindova

Greece will recover in two and a half years, forecasts economist Erol User, a former World Bank official and economic adviser to the Turkish presidency. He visited Athens at the invitation of the Institute of Diplomacy and Global Affairs and shared the experience of Turkey in the cooperation with the International Monetary Fund. After years of postponed reforms and uncontrolled public spending, Turkey found itself on the brink at the beginning of the new millennium. The crisis that occurred in the country depreciated the Turkish lira by over 50%, inflation exploded to almost 68.53%, GDP dropped by 7.4% and tens of banks and financial institutions went bankrupt. Having no funding and only a vague idea of how to deal with the situation, Turkey received the exceptional assistance of the International Monetary Fund.

Ten years later, the country records an impressive growth in GDP of 11%; according to official data, it has a stable financial system and a positive trade balance. User himself explains that the country is far from ideal, but macroeconomic indicators have been stable and Turkey has become an attractive place for many investors. In terms of political power, he does not deny that it is largely authoritarian, but it has its good sides. The government has been the same for the last 10 years and investors feel secure in the political system. With a serious dose of black humour, User said about the public instability in Greece: "Too much democracy might be dangerous."

"What we should know is that Greece is in a similar position to that which Turkey was in 10 years ago," said User. He did not fail to note that not all the variables were the same, but the main problem of the insurmountable debt that Greece is facing today is well known to Turkey. "Yet unlike Turkey Greece’s economy is entirely connected to those of others in Europe and therefore the impact has much greater consequences." He stressed that along with the programme of the International Monetary Fund, Greece would need both financial assistance and a debt targetting individualized plan to help it along on the road to economic recovery. When this plan fits the situation, the political forces in the country should reach consensus on the appropriate measures.

Erol User stressed that the intervention of the International Monetary Fund is the bitter medicine that needs to be taken in order for the ailing economy to recover. He stressed that if everything was fine in Greece, there would be no need for financial assistance. Therefore, the government should adhere to the programme. The relationship between Turkey and the International Monetary Fund is the relationship between a lender and a borrower. There is no room for favours. "For many years Turkey was essentially on a spending spree without implementing much needed reforms in terms of its monetary policy. This obviously could not go on forever. Especially since exports were declining and the debt obligations came due." Turkey needed to pay back its debt. Both its previous debts as well as the amount that was to be borrowed, because debt restructuring was not approved.

Turkey was not able to negotiate any provision of the aid. However, the government was convinced that the established recovery programme would work and strictly adhered to it. The total amount the country received from the International Monetary Fund was 23.6 billion dollars. The aid was received on condition that the country would impose an extremely tight monetary policy that would eradicate old habits that inflated spending. Erol User noted that their long-term adherence to the recovery plan convinced Turkey over time that the reforms of the International Monetary Fund that had been applied in the past 10 years helped the country and the overall economic stability. He also stressed that he believes in Greece’s ability to overcome all difficulties. The company for financial advice that he opened in Greece this year, despite the heavy tax regime commented on by local businessmen, proves his optimism.