Our ability to do this is a result of policies of fiscal discipline we have implemented since our own crisis in 2001. In the past, we had debts to the IMF of $20 billion. Now, that is down to $1.7 billion. Our central bank has reserves of $115 billion.
The crisis we have gone through was similar to what the EU is experiencing now. Many banks went bankrupt. People’s savings disappeared. Companies closed down. The Turkish economy shrank drastically.
That crisis was a very important lesson for us. Since 2002 our government has pursued a strategy of growth along with fiscal discipline – which is why we’ve reach the level we are at today.
In order not to go through a crisis like 2001 once again, we have also carried out structural reforms – ranging from timely and decisive banking reform to changes in health care and social services – that not only strengthened the Turkish economy but also increased the confidence of the Turkish people in their government.
As a result, Turkey has climbed to the rank of the world’s 16th largest economy. Last year our economy grew at 8.5 percent – one of the fastest rates in the world. By comparison, Europe only grew by 1.5 percent last year. Over the last nine months there was no growth at all in Europe taken as a whole, with GDP actually shrinking in some places.
In Europe in general, public borrowing in annual budgets has grown to 4.5 percent of GDP, while in Turkey it has fallen to 1.7 percent.
Overall, long-term debt in Europe amounted last year to 85 percent of GDP, while in Turkey it was only 37 percent.
Unemployment in Turkey is at 8.5 percent. Overall in Europe it was 10.5 percent as of August 2011.
All of these indicators point to the fact that Turkey would actually fulfill the Maastricht criteria for entry into the eurozone, unlike many present member states. [For example, the Maastricht Treaty stipulates that a country’s debt should not exceed 60 percent of GDP, and borrowing in annual budgets should not exceed 3 percent of GDP.]
The success and resilience of Turkey today is due to the structural reforms we have undertaken since 2002 and because we have stuck to a sensible fiscal and budgetary policy with the proper discipline.
Of course, none of this was easy. The austerity policies were very hard to implement.
In light of the current troubles in Europe, we learned one very important lesson as we implemented these tough reforms: The people need to be able to trust those who govern them and not feel that their interests are being betrayed. Without that trust, we would not have been able to make the very difficult readjustments in our social security system.
For all these reasons, Turkey today is strong and resilient. But there is more to be done to improve our performance and build proactively on this foundation.
We have just finalized our planning for the future and are taking the next steps. By 2023, we want Turkey to be one of the top 10 economic areas of the world. In the last 10 years we managed to increase the per capita income threefold. Over the next 15 years we want to increase per capita income from $10,500 to $25,000. That would require a growth rate of 5.2 percent over the next five years.
Recep Tayyip Erdogan is the prime minister of Turkey. His remarks are excerpted from a recent speech to the Berggruen Institute on Governance in Berlin.