Sunday, May 9, 2010

The Debts of the Lenders: Turkish Growth in Stark Contrast To Greek Shrinkage

The whole irony behind the Greek drama is the concurrent rise of its age old rival, Turkey. A large part of the fiscal imbalances were brought about by military spending in preparation for a potential war in the Aegean over Cyprus.

But this conflict was ages ago and the political situation has calmed down quite a bit with the Turks routinely begging for entry into the EU zone every few years. The Turks have a dynamic, growing economy that is poised to overtake every other nation within the EU bloc. Indeed, the perenially high interest rate banking sector is finding itself enjoying a period of relative calm amid the chaos being wrought just a few kilometers away from its borders.

Perhaps nothing is more ironic than Turkey turning away the IMF at the very same time that its neighbor is begging for foreign intervention.

In March this year it sold $1 billion of 11-year dollar-denominated bonds at the lowest yield on record, after the government decided it did not need help from the International Monetary Fund.
If Turkey had joined the EU then its fortunes would've been tied to a moribund political economy with decisions made by bureaucratic vote instead of the independence necessary to launch itself upwards.

Additionally, the larger and more youthful demographic make for a more appealing picture than the image of aging Greek pensioners burning rubber tires or firebombing their local banking branches.

Finally, its close proximity to Iraq may be considered a boon instead of a burden. The security situation has calmed down considerably since the martial law era of the 1970s and 1980s when Kurdish insurgents ran amok throughout the countryside. While a de facto Kurdistan exists in northern Iraq, the US presence in the region has actually stabilized the situation instead of inflaming it. While Turkey may not be able to benefit directly from the oil wealth in Iraq, its economy may experience secondary bonuses such as improved trade links via a land route that was formerly closed off during the Sadam years.

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