Eurozone vs. lira zone
During his visit to Germany this week, Prime Minister Recep Tayyip Erdoğan conveyed quite interesting as well as controversial messages regarding Turkey's "long and narrow road" to EU membership. In a speech during the closing remarks at a conference on "Europe Beyond the Crisis," which was organized by the Nicolas Berggruen Institute on Governance in Berlin, Erdoğan underlined that his government had been cautioned by British officials, whose country does not use the euro despite being a member of the EU, against switching to the common currency when Turkey's membership to the union materializes. "They tell us to not even consider entering the eurozone and that we should build a [Turkish] lira zone."
Among several remarks, two particular messages he conveyed may have special importance. The first one is a quite well-known argument by the Turkish side regarding the benefit of Turkey's membership to the EU. It states that "rather than creating additional costs for the union, Turkey has the capability to share the existing burden and bring even more dynamism to the union." Having stated that, Erdoğan continued, complaining, "But Europeans did not understand us; they did not want to understand us, and they still do not understand us."

Prime Minister Erdoğan said that "in the post-global crisis era, it seems that the eurozone is not functioning properly -- even more, it is creating further problems in tackling the crisis, as the cases of Greece and Spain have shown. This is because the monetary union eliminates the flexibility of nations to use monetary policies autonomously." Having stated this quite correct observation, he noted that even in the case of EU membership, Turkey may not decide to become a member of the eurozone. He pointed out that Great Britain is a member of the EU but not the eurozone, and its economy is in quite better condition these days.

Let me elaborate first on this second topic. Before discussing the "lira-zone view" of Prime Minister Erdoğan, we have to understand what a monetary zone is by looking at the single living case in Europe. The eurozone, officially called the euro area, is an economic and monetary union (EMU). According to the European Commission's definition, while all 27 EU member states take part in the economic union, some countries have taken integration further and adopted the euro. Together, these countries make up the euro area. These states have adopted the euro as their common currency and sole legal tender, and most other EU states are obliged to join once they meet the criteria to do so, reads the related Wikipedia entry. Obviously, EMU represents a major step in the integration of EU economies as "it involves the coordination of economic and fiscal policies, a common monetary policy, and a common currency, the euro," according to the European Commission.

Theoretically speaking, it was expected that EMU would imply "(i) the coordination of economic policy-making between members, (ii) coordination of fiscal policies, notably through limits on government debt and deficit, (iii) an independent monetary policy run by the European Central Bank (ECB), and (iv) the single currency and the euro area," according to the European Commission. Additionally, EMU was considered an advanced step in the process of economic integration in Europe. It was also expected that economic integration would bring "the benefits of greater size, internal efficiency and robustness to the EU economy as a whole and to the economies of the individual Member States." The European Commission outlines the benefits of union membership to EU citizens as economic stability, higher growth and more employment, but these have not be met so far.

What is obvious is that since the formation of EMU or the eurozone, it has remained in its infancy and, therefore, the current debt crisis has been the most serious test of the resilience, convenience and strength of EMU.

To sum things up, it seems that except for a few mechanisms, EMU did not result in the above-mentioned benefits and failed to fulfill its initial goals. This is because EMU's complicated structure represents a high economic integration. In this regard, we can say that its maintenance may be more complicated than its initial formation. The union, therefore, faces serious challenges in the post-crisis era. Based on these observations, in my next column I would like to address Prime Minister Erdoğan's remarks on the formation of a lira zone in the region surrounding Turkey as well as the ability of Turkey to provide further dynamism to the EU.

İBRAHİM ÖZTÜRK (Cihan/Today's Zaman) CİHAN
Last Modified: 2012-11-05 10:00:08
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