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Roubini: Greece should have taken Turkey as example for crisis

BURSA - Daily News with wires | 4/22/2010 12:00:00 AM |

Istanbul-born economist Nouriel Roubini says the current turmoil in Greece would not have occurred if the European-Union member had looked east to Turkey and took copied its reform effort after the 2001 crisis. Speaking to businesspeople in Bursa, Roubini says Turkey’s membership in the EU will only strengthen the union and predicts a revival in membership talks

If Greece had followed Turkey’s lead in making financial reforms in 2000-2001, it would not be in such dire straits today, one of the world’s most prominent economists told Turkish business leaders Wednesday in Bursa.

Nouriel Roubini spoke at an event organized by the Automotive Industry Exporters Unions. The renowned economist, dubbed “Dr. Doom” because of his early prediction of the global financial crisis, addressed nearly 400 people, most of whom paid 350 euros to listen to him.

Evaluating the worst global recession since the 1930s, Roubini said when the United States economy sneezed, the world would generally catch a cold, in the latest crisis, however, it had come down with “pneumonia.”

“But the recent news is good,” Doğan news agency quoted him as saying. “The recovery has started. The debate is whether it will be a V-shaped, fast recovery, a U-shaped slow recovery or a W-shaped, double-dip recovery. My opinion is it will be a U-shaped process. This recovery will not be stable and steady.”

Touching on positive economic data coming from the U.S., Europe and Japan, Roubini said newly developing economies will recover faster than Turkey and economies in Asia. He predicted a gross domestic product growth of 3 percent for the U.S., 2 percent in the eurozone, 5 to 6 percent in Turkey and 9 percent in China this year.

“In the second half of the year, the growth rate might slow down in the U.S., dragging average annual growth down to around 2 percent,” he said.

Turkey and other developing markets derived the correct lessons from the 2001 crisis and engaged in structural reforms, Roubini said. “Meanwhile, developed economies [in the West] started to have problems.”

Reflecting on the importance of the U.S. economy in exiting the global crisis, Roubini said the stimulus policies implemented by governments worldwide are of crucial importance, as there will be trouble if they are implemented for too long or if they are curtailed too soon.

[HH] Drama in Greece

The reason the Greek drama engulfed eurozone economies is because “it did not implement structural reforms in time” and because of high budget deficits, the economist said.

“The crisis in Greece will create huge problems,” he said. “Some countries might leave the euro. A possible intervention by the International Monetary Fund would only postpone the problem, not solve it. This crisis is a crucial test for the eurozone. If Greece had followed Turkey’s post-2001 reforms, it would not be in this situation today.”

Turkey’s importance in the global economy will increase further, according to Roubini. “But Turkey should diversify in the trade sense,” he said. “It should orient toward new markets. Besides Europe, it should develop trade relations with the Middle East and Asia. These regions will post [remarkable] growth in the following period.”

Turkey is “moving on its path” by taking the necessary lessons from the past, Roubini said. “It is open to foreign investment. Its labor costs are relatively low. It could be a center for financial inflows from Europe to the Middle East. It may be a trade center between the east and the west. You have a strong workforce, but it needs training.”

[HH] Erdoğan’s suggestion ‘might not work’

Reflecting on Prime Minister Recep Tayyip Erdoğan’s suggestion that every member company of the Turkish Union of Chambers and Commodities Exchanges employ one extra worker to overcome unemployment, Roubini said this “might not work.” What the government has to do instead is engage in “structural, fiscal and financial reforms,” he said, according to the daily Hürriyet.

Noting that some EU members fiercely resist Turkey’s possible membership, Roubini said talks on membership will “accelerate in three years,” due to Turkey’s economic and labor-force power. “Turkey’s membership to the EU will only strengthen the EU,” he said.

The economist, who is also the chairman of Roubini Global Economics, said China cannot be the locomotive of the global economy. “For an exit from the crisis, what is important are the U.S. and European economies,” he said.

Responding to questions from businesspeople, the Istanbul-born economist said there is a risk of energy and oil costs going up.

On currencies, he said the U.S. needs a weak dollar while the EU needs a weak euro. “If the budget gap in the U.S. rises rapidly, a dollar crisis might ensue,” he said. “But I believe the situation will remain the same in essence.”

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