Crisis from German, French and Turkish housewives’ perspectives

Μάι 14th, 2010 | | Κατηγορία: Ελλάδα, Κόσμος | Email This Post Email This Post | Print This Post Print This Post |

When Europe struggles to save Greece and thus euro, many comments, essays and even cartoons including lessons derived and predictions on Europe’s future have appeared in the world mass media. I would like to draw current ‘financial kitchen’ picture from housewives’ point of view, instead of explaining it by sophisticated economic jargon, like Angela Merkel did in 2008. After Lehman Brothers went bankrupt Chancellor of Germany had this advice for indebted bankers, consumers and governments: Be more like a German housewife. According to Mrs. Merkel, the financial crisis could have been avoided as

“One should simply have asked a Swabian housewife because she would have told us her worldly wisdom: in the long run, you can’t live beyond your means.”

As the Greek parliament has taken a series of steps to bring the nation’s deficit under control, the Greek people are angry to hear that they must accept fewer of the benefits they receive and pay more taxes to avoid a catastrophic default. In the meantime, the EU has made sure that the Greek people have to take the nasty medicine made by the Franco-German axis of the club, by other words, ‘Swabian and French housewives’ of the European ‘foyer’. In the meantime, the Greek crisis has heated up ‘financial kitchen’ culture clash between two foremost powers of the European Union. The German and French housewives’ recipes and profiles were different. The Federal German housewife, with its attachment to rules, believes in budgetary discipline because of lost of her savings during 1923 hyperinflation and after World War II. She is hard-working, and analytical. The Republican French housewife, with her expectation concerning state intervention, has more Mediterranean attitude toward debt. But despite their differences, while grappling with the recipes against crisis, they could derive the lessons listed below, for the future European housewives:

1. Have a defined crisis management plan.
2. It is utmost important to develop an analytical framework for assessing potential risk, setting goals and triggering action, while dealing with the kitchen budget.
3. Do not neglect the systematic monitoring of the price developments. For example, the supermarket at the corner of your street may increase VAT while you think that prices and remain the same in your neighbourhood.
4. Do not provoke delays in securing the economic advantages of your position within the club where you are member.
5. Do not trust governments applying populist fiscal policies. They should focus on long-term targets.
6. If you have already started borrowing, you should not forget that debt is debt. No nation – no matter how part of the powerful regional economic club – can escape the rules of fiscal gravity. No nation can avoid the reality that investors cannot buy unlimited amounts of debt.
7. The membership of EMU does not prevent the country from having current account deficit.
8. The main factor which can reduce the current account deficit, in the forthcoming years, is lower consumer spending. Use the loans for investment instead of consumer spending.
9. Do not trust the foreign investment more than your own family members/citizens savings.
10. Never forget the importance of the competitiveness and improve it. The decline in demand for exports may force national firms to become more efficient.
11. Reliability of statistics is crucial for your credibility. Any investor or creditor in a sector, where the figures do not reflect the truth, would feel secure.
12. Do not expect miracles when you have financial problems. In the mass subconscious of the fatalist people may still have the expectation of “deus ex machina” appearing at the last moment of the tragedies and solving all problems. Modern “deus ex machina”, in other words the EU, will not come to your help with a magic wand.

As for Turkish housewife, living in non-EU neighborhood -the nearest one to Greece-, she is not gloating about the problems facing her neighbor. She is aware that the Greek crisis would make the EU wary of further enlargement. She thinks that the unbalanced and inequal growth overlooked by the chief executive housewives of the club -which refuses her membership since 1964- will inevitably result in new crises. On the other hand, the fact that the EU had not been as demanding to its members on making them follow ‘Euro-pean’ principles as it is towards Turkey has a negative impact on EU’s credibility and attractiveness.

Although Turkey has not experienced any banking instability, macro-economic imbalances or high public finance deficits it could deriver similar lessons in the past. While paying its debts with domestic savings and experiencing low potential growth rates, Ankara could not benefit from long term payment strategies and low interests. But unlike developed/western market of Europe, it derived correct lessons from the 2001 crisis and engaged structural reforms although it has not been part of EMU.

The Turkish housewife becomes more septic towards the EU neighborhood where she has dreamed of living for many years…Perhaps, it is time to look for new neighborhood where she may lead other than the EU young housewives and create her own economic recipes…

Zeynep Pelin Ataman

12 σχόλια
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  1. The situation nowadays is completely different to Turkey;s (who has its own currency). In 2002 the global environment was far (way far) better than it is now. Low interest rates (so borrowing costs for emerging markets were slashed dramatically) and abundance of funding. Plus there was confidence and high moralle because of progress towards joining the EU and this made Turkey highly attractive for foreign investments. You want more? Currency (lira) appreciation after 2002 (after it had experienced unprecedented rates of free-fall) made external borrowing even more attractive. And guess what, prolonged low interest rates lead to constant rise in equities and real estate (which eventually lead to the housing bubble and the subprime mortgage crisis in USA).

    Lets see how Turkey will do now, with external funding and domestic growth in decline, domestic unemployment in rising and exports in deterioration.

  2. “On the other hand, the fact that the EU had not been as demanding to its members on making them follow ‘Euro-pean’ principles as it is towards Turkey has a negative impact on EU’s credibility and attractiveness.”

    …due to the fact that Turkey habitually violates human rights, raises demands for the Aegean sea, threatens with casus beli if Greece does implement its legal rights by extending its territorial waters to 12 miles, sets forth unsubstantial claims about the “Turkish minority” in Western Trace at the same time that promotes a hostile propaganda between the Muslim greek citizens of the region, in an attempt to arbitrarily nominate all these populations as Turkish. Ironically, it is Turkey that actually violates the rights of its minorities, such as Kurds and Greeks and millitary ocuppies the north section of Cyprus nearly for 40 years…

    Μετά τη συστράτευση με το ΛΑΟΣ εναντίον της επάρατης αριστεράς, τα δάκρυα αποχαιρετισμού για την Ντόρα έχουμε και τους Νεοοθωμανούς να μας παραδίδουν μαθήματα ευρωπαϊσμού και τους εδώ νεοραγιάδες να τους φιλοξενούν…

  3. Ας έκανε κάποιος τον κόπο να σουλουπώσει τα κάκιστα αγγλικά του κειμένου ώστε να διαβάζεται…

    «On the other hand, the fact that the EU had not been as demanding to its members on making them follow ‘Euro-pean’ principles as it is towards Turkey has a negative impact on EU’s credibility and attractiveness.»

    Κλασική Τούρκικη καραμέλα “αν δεν μας θέλετε δεν σας θέλουμε και εμείς και θα γίνουμε κακοί Ισλαμιστές μπλα μπλα μπλα…”
    Η ΕΕ απέτυχε να επιβάλλει δημοσιονομική πειθαρχία στα μέλη της. Οι αρχές που η Τουρκία εγκαλείται να εφαρμόσει για να μπορέσει να γίνει μέλος έχουν να κάνουν με ανθρώπινα δικαιώματα και το διεθνές δίκαιο και είναι αρχές που τηρούνται από τα σημερινά κράτη μέλη της ΕΕ (έστω και αν στην Ελλάδα ορισμένα δικαιώματα μας βρίσκονται στο έλεος συντεχνιών και τραμπούκων, όπως καλή ώρα αυτό του να επιλέξουμε να εργαστούμε στη διάρκεια απεργίας…)

  4. Άι βε, μάθανε πως πηδιόμαστε, πλακώσανε και οι Τούρκοι!!!

    Με αναλογία πληθυσμού μεταξύ Ελλάδας και Τουρκίας 1 πρός >6, η αναλογία Ακαθάριστου Εθνικού Προϊόντος με εξισορρόπηση τιμών είναι από 1 πρός <3, δηλαδή οι Τούρκοι είναι ΤΟΥΛΑΧΙΣΤΟΝ δύο φορές πιό φτωχοί από τους Έλληνες (υπολογίζοντας την διαφορά των τιμών των αγαθών στις 2 χώρες)

    Rank Country 2007 2008 2009 est. 2010 est. 2011 est. 2012 est. 2013 est.
    7 Turkey 888.095 915.212 869.068 915.022 965.185 1,016.776 1,072.990
    12 Greece 325.011 341.688 344.404 349.448 356.775 367.312 380.354

    Αντίστοιχα, το Ακαθάριστο εθνικό προϊόν ανά κάτοικο (με συνυπολογισμό των τοπικών τιμών) είναι 29.000$~33.000$ γιά την Ελλάδα (αν και προφανώς θα πέσει) ενώ το αντίστοιχο γιά την Τουρκία είναι 11.000$~14.000$.

    Δεν πρόκειται να κάνω σύγκριση μεταξύ του Ακαθάριστου Εθνικού Προϊόντος ανά κάτοικο οποιασδήποτε άλλης Ευρωπαϊκής χώρας και της Τουρκίας γιά να μην μελαγχολήσουν ακόμα περισσότερο οι Τούρκοι. Εν πάσει περιπτώσει, αν δεί ποτέ κανενας αυτό τον ανεκδιήγητο Αταμάνο στον δρόμο, πείτε του ότι η Τουρκάλα νοικοκυρά μπορεί να μου πάρει μία πίπα γιά πέντε Εύρω (5 Euro) και άν δεν της αρέσει, μπορεί να πάει να γαμ….

  5. Perhaps Turkish housewives should reconsider their relationship with the EU. Perhaps they should abandon the obsolete notion that strong commerce requires proximity. That was probably true in the 19th and some of the 20th century, when transportation costs accounted for a much larger proportion of total cost. Today, primarily due to technological advances in transportation, the fractional cost to ship most goods (shipping cost / totals value of product shipped) is miniscule for most products. For some products, such as software, it is virtually 0.

    Yet this overrated benefit of commerce proximity is the main fallacy upon which the European Union is still based. According to this fallacy the benefits of proximity (as seen through supposedly lower shipping costs) will more than compensate for the loss of competitiveness brought about by the eventual economic and political harmonization of Europe. Europeans, not only miscalculate this compromise, but progressives, i.e. most Europeans, seem to be living in a fantasy world whereby integration, harmonization and homogenization are thought to actually produce an overall increase in economic efficiency.

    I would thus recommend that Turkish housewives look into free trade agreements (and if the trade includes free movement of people then even better) between various countries, far and near, rather than getting in bed with the EU-Titanic.

  6. Well, then we should tell the Darfur folks to head towards Turkey ASAP.

    The Turks can have progress as long as they have stability. If they enhance relations with more unstable countries and allow their citizens to enter Turkey, the already not-so-recentry-or-perfectly-pacified Turkey shall become a Titanic of immense proportions… For sure, Turkey cannot maintain stability if Europe becomes unstable. YOU ARE HANGING FROM OUR BALLS.

    Apart from that, Europe is standing on its’ feet because of its’ hardworking, honest and innovative North Europeans. Turkey cannot find an alternative in this expect in a resurgent Russia, but in such a relationship the Russians shall be the boss and Turkey the doggy. Hence…

  7. My problem in the current crisis (apart from the execution of the English language, next to that of my own which occurs daily in Greek tv, especially around the early afternoon), is that every single person, regardless of their affiliation (professional, institutional or otherwise), seems to claim having a concrete opinion over the situation. Somehow, everyone turned into an analyst. I guess I should have not spent the last ten years of my life on international financial regulation. That was a mistake. I should have stayed home and cooked for the man. Perhaps hand him his slippers, instead of doing econometrics of micro-corruption. Do the dishes in the end, while he watches soccer and drinks beer…
    What is next? Joe the plumber, where are thou?

    (Somehow the situation reminds me of that song by Offspring, like a decade ago: Why don’t you get a job?)

  8. Excuse me madam, this is not new. Actually there is a joke for that too: (you won’t believe it, but it is since 1997 or before)

    An economist returns to visit his old school. He’s interested in the current exam questions and asks his old professor to show some. To his surprice they are exactly the same ones to which he had answered 10 years ago! When he asks about this the professor answers: “the questions are always the same – only the answers change!”.

    Economics is not a science. It never was. Thus everybody is entitled to his/her own opinion.

    My advise to you is to find a real job, a productive job: Grab a pickaxe, a shovel, the drill, whatever is necessary for a real job, and go make it. Forget your mans’ slippers…

  9. The existence of opinions is not a problem. Their self-righteousness is an entirely separate story.
    I laughed my heart out by the exchange between Philomila Tsoukala (NY Times op-ed) and Soti Triantafyllou (Athens Voice), and the former’s reply to the latter in a letter. The self-righteousness of it all makes a huge difference (hence the comedie grecque).
    As for international financial regulation: it is a real job. Who do you think *IS* the IMF? Just that building on the 19th? It’s the ECONOMISTS, stupid. And the lawyers.
    Read “Law and Plumbing” by Lord Stephen Sedley…! Any opinion, in any combination is possible. Not plausible, though…
    And regardless of whether the answers change every ten years, financial regulation is always a painful reality for some. The rest is only icing on the cake…And sweets are bad for your teeth anyway…

  10. All of this is nice Emma, but I am just a lousy peasant from a mountain village / rawdy sailor roaming the seven seas. I don’t bother reading about either the Athenian or the New Yorkers’ decadence. They were not mentioned either by the original article or by any replies before, and suddently you cry out about their claims to self-righteousness?

    The IMF was not created by economists, but by politicians, and it is politicians who rule it, not economists. Thus, I don’t know what the hell you are talking about, the economists and the lawyers are the politicians’ doggies in the end of the line, or much worse, by politicians who claim to be economists, but always seek political careers…

  11. Keynes…Was…An….Economist….
    Seriously, how well do you know the IMF (or the WB for all that matter)?
    And how well do you know how much others know about the IMF?

  12. I was talking about Strauss-Kahn, and in any case, I don’t think that the worlds’ bankers decided to create the IMF and the WB, because these are not ordinary banks. The decisions behind the IMF, the Breton Woods agreement and much more were taken by politicians. The likes of Keynes and Strass-Kahn are merely called to implement them (if they are not politicians in an economists’ skin anyway…)