The Structure of a Financial Crisis
Lessons from Turkey
BY AYBEK GOREY (*)
INTRODUCTION
The year 2001 had been unlucky for Turkey. Apart from the crisis in 1994 and November 2000, the country had to face another financial crisis, causing problems in the management of its economy. Why does a country delve deep into financial crisis? What are the possible immediate triggers for both the current and potential new crises? What precautions should be taken for the key issues like the fragility of the financial and banking system, belated reforms and privatisation, rampant corruption, exchange rate policy? And how can the governments satisfy the markets and people to undertake these reforms?
The current crisis has not hit the country overnight. This article figures out the weakness of the system, years of neglect and mismanagement, possible solutions for other developing countries.
One has to bear in my mind that even evaluating the aftermath of the 1994 crisis, Turkey was a rising star, with aspirations towards full membership to the European Union. Among the potential applicants of EU membership, - mostly the Transition Economies of Eastern Europe- Turkey was the mere applicant with a functioning Customs Union with the EU back in 1995. With a relatively large and dynamic market, having high hopes for rapid economic and social progress, Turkey seemed a valuable candidate for the European Integration. Now after the 2000 November and 2001 February crises, the shrinking of the economy suggests that Turkey can only catch up with the figures of year 2000, as far as the year 2004, let alone the EU membership and further growth. To indicate why such a failure has been suffered, we ...