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GÜVEN SAK >The Macron plan matters for Turkey

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Looking for a reason why the eurozone was so ineffective in combatting its economic problems? Look at the French inaction in dealing with problems of its own. The country has been lagging behind economically, socially and politically for the past decade, while Germany ploughed ahead to be leader of Europe.

President Emmanuel Macron of France has finally decided to do something about this. He unveiled a plan for less rigidity in the French labor market. If it manages to improve the performance of the French economy, that is good news for Turkey, too. Let me elaborate.

So could it work in France? Well, a similar plan worked perfectly well in Germany. No, Germany is no France. But look at recent performance. German unemployment rate peaked at around 12 percent in 2005 and then declined to single-digit numbers starting from 2007. In 2005, the French unemployment rate was around 9 percent compared to Germany’s a shade below 12 percent. Between 2003 and 2007, the German unemployment rate was higher than that of the French. Now France has a stubborn rate of 10 percent compared to Germany’s 4 percent. That’s what Macron’s Copernican revolution is about. It is a game changer for a country like France. 

Just have a close look at the Macron plan. The plan is to replicate in France what Gerhard Schröder had done in Germany back in 2003. Schröder was the Chancellor of Germany between 1998 and 2005. He was the guy who, among many other things, has brought flexibility to the German labor market. Schröder’s plan passed the Bundestag in 2003. It worked. The so-called “Agenda 2010” worked wonders and the rate of unemployment had declined to a third of what it was in the past. Yet it had a cost. Schröder’s chancellorship ended in 2005. His SPD lost the elections. That’s how Angela Merkel became the Chancellor of Germany. 

And believe me, the guy knew that he was about to lose the election. I recall how he explained this to President Recep Tayyip Erdoğan around that time. It was just after the 2002 elections in Turkey, and the ruling Justice and Development Party (AK Party) had won the elections by a landslide, yet Erdoğan was not even a member of parliament due to a court case prohibiting his electability. Smooth political transition was the issue of the day. That’s when Erdoğan started a tour of European capitols. This was just to oversee an orderly transition of power in Turkey, mind you. Guess where the tour started? Berlin, of course. There, Schröder found time to explain how Agenda 2010 labor market flexibility measures were going to be good for Germany, but bad for the SPD in the upcoming elections. Yet he did it. It took courage for politicians to make hard decisions.

Macron is doing what Schröder had done about 15 years ago. If it also works in France as in Germany before, this will be good for Turkey. Why? Turkey is an intrinsic part of the European economy. Turkey has changed a lot in the last four decades. In 1979, the share of trade in GDP was a shade below 10 percent. Today, this number has reached around 50 percent. Turkey has opened up. Around 60 percent of our trade is with the EU. Turkey is an integral part of the EU automotive value chains, especially. 

It’s like the computational fluid dynamics. The performance of the Turkish economy directly depends on the performance of the EU economy. The political upheaval in our newly diversified Middle Eastern markets have strengthened, not weakened this dynamic. The EU is important to Turkey, much more so than Russia or Iran, mind you. 

If Macron’s Copernican revolution succeeds in France, it is not only good for Europe but is also good for Turkey, which is an inseparable part of the EU economy.

September/09/2017

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