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