Time To Smell The Coffee

You can smell the coffee now: this is the opinion of Morgan Stanley’s Serhan Cevik referring to the nearest thing to an ‘economic miracle’ that we have in or around the EU at the present time:

It?s time to smell the coffee ? Turkey?s disinflation process is not a temporary phenomenon. Though currency movements play a notable role in driving inflation mechanics of highly dollarised economies, disinflation in Turkey has not been just a by-product of exchange-rate valuation. We believe that it is unfair to take currency appreciation for granted and overlook fundamental factors driving both exchange-rate and inflation dynamics. First, the favourable pass-through effect is a result of fundamental improvements such as a rebalancing of residents? portfolio allocations and productivity-driven export growth. Second, monetary discipline assisted by fiscal consolidation and structural reforms has played a critical part in improving institutional credibility. Third, productivity gains that have resulted in a remarkable drop in unit labour costs help lower the rate of price increases. And last, but not least, economic slack as manifested by the cumulative output gap and labour-market developments has accelerated the pace of disinflation.”

But if this is how things look to some (even if the looking is done not from Turkey but from Serhan’s London window) this is not the way they seem to EU single market commissioner Frits Bolkestein:

Turkey should be kept outside the European Union to act as a “buffer” protecting Europe from Syria, Iran and Iraq, according to Frits Bolkestein, the EU single market commissioner.

Mr Bolkestein argues that the former Soviet republics of Moldova, Belarus and Ukraine should also be excluded, to insulate Europe from Russia.

His views come in a new book, The Limits of Europe, in which he warns that a geographically overstretched Europe would become “little more than a glorified customs union”.

The Dutch liberal is one of the most vocal sceptics of Turkish membership among the 20 EU commissioners who must recommend in October whether to start accession talks with Ankara.

However, a majority on the Commission is expected to approve the Turkish bid, provided Ankara continues its reforms and helps to reunite the island of Cyprus.

Germany’s Christian Democrats, the conservative opposition, are among those campaigning to exclude Turkey from the EU, while many French politicians are sceptical or hostile. Valery Giscard d’Estaing, who chaired the European convention, said in 2002 that Turkish membership would mark “the end of the European Union”.

The issue is expected to be one of the most politically sensitive in the European parliament’s June elections.
Source: Financial Times

By the way, astute readers of last Friday’s post will once more notice how in Turkey too ‘disinflation’ is accelerating nicely.

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About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

3 thoughts on “Time To Smell The Coffee

  1. If Europe + Turkey would be so “geographically overstretched” as to make the EU little more than a glorified customs union…

    I wonder if Mr Bolkestein similarly considers the USA as little more than a glorified customs union ?

    If he argued that Europe + Turkey would be Institutionally overstretched, he might have a point, albeit at the likely cost of his credibility as an effective administrator.

  2. Bolkestein is playing the same game as he did in Dutch politics. He is playing to the fear of the stranger. Turkey as a buffer between “us” and “them”. This divisive behaviour always got him enough votes to be called successful, but always too little to actually lead a government and implement those policies. It will be the same now. Except this time his chances of remaining in the commission aren’t that big, because the current Dutch government favours Turkeys entrance into the EU. But maybe the VVD, his party, can keep him on, because the other government party CDA had some of them appointed to influential international jobs. (Jaap de Hoop Scheffer, to name one)

  3. How is a Turkey deprived of economic resources by being kept outside of Europe is to help protect Europe from whatever threat Mr. Bolkestein is talking about? If I were him, I would be more afraid of a Turkey left as an outsider, than fear those beyond Turkey’s borders.

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