Growing like gangbusters, Turkey says Western economies need 'serious reforms'

The global economy remains deep in crisis and Europe and the United States are doing little to resolve its core causes, Deputy Turkish Prime Minister Ali Babacan warned Friday.

Mr. Babacan, a former foreign minister and Turkey’s point-man for economic policy, said neither the US nor the eurozone countries have yet to deal with the underlying causes of the global economic slowdown: a weak financial sector, weak corporate balance sheets, risky public financial positions. 

Speaking at the Fletcher School of Law and Diplomacy at Tufts University, Babacan warned that this year will be a year of reckoning for the European Union, and he pointed to the recent collapse of the Dutch government over the budget austerity measures as a harbinger for Europe’s coming fiscal battles. 

“2012 will be test year for European countries,” he said. “2013 will be test year for American economy. After the elections [the new administration] will find very difficult decisions on the table right away. There has to be serious fiscal adjustment and a medium term plan to deal with the deficit. So far, there is no credible plan to deal with deficit.”

Babacan said developed countries need to undertake serious structural changes including reforming social security and labor markets: “It is absolutely necessary for serious reforms, especially in many European countries, absolutely necessary and urgent.”

Babacan is a founding member of Prime Minister Recep Tayyip Erdogan’s Justice and Development Party and considered a leading member of the “Neo-Ottomanism” movement, moving Turkey’s foreign policy away from a predominantly Western focus to integration and activism in its immediate neighborhood – the territories of the former Ottoman Empire.

Babacan contrasted the Western economic turmoil, with Turkey’s booming economy which he said grew at 9.2 percent growth rate in 2010, and 8.5 percent in 2011.

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