Euro Crisis ‘Ticking Bomb’ for Turkey, Says Turkish-Armenian Economist

ISTANBUL — The eurozone debt crisis has turned the European economy into “a ticking time bomb” that lies at Turkey’s door, according to a top economist who has been ranked among the most influential thinkers of our time, reports the Hürriyet Daily News.
Speaking to the Hürriyet in an interview last week, Daron Acemoglu, a Turkish professor of Armenian descent at the Massachusetts Institute of Technology (MIT), also urged the Turkish Central Bank to raise interest rates from their current historic lows.
“The European time bomb lies at the door for Turkey,” Acemoglu said. “The Turkish economy is closely connected to the European economy. Thus, it is open to all possible shocks.”
Regarding the possibility of a new global recession, Acemoglu put the chance as high as 50 percent. “If there is a new recession in Europe, Turkey would go back to experience 2009 once again,” he said, a year when the Turkish economy contracted by 4.7 percent.
Despite the positive effects of economic reforms, Turkey should “increase interest rates” in order to put the brakes on strong domestic demand, Acemoglu said, adding that such a move would provide the policy flexibility that would be necessary following a possible shock from the eurozone.
“Turkey aims to slow down credit expansion while keeping interest rates too low. This is not the right thing to do,” Acemoglu said. According to the 44-year old economist, today’s Turkey has similarities with the pre-crisis period of US and European economies.
“A key [sign] of an economic crisis is overspending and overconsumption, which generally is followed by a sharp decline in consumption later on, creating serious problems,” he warned.
Reminded of Turkey’s offer to appoint him as the permanent representative to the Organisation for Economic Co-operation and Development (OECD), Daren Acemoglu said he was “proud” of this offer. “I have not rejected it, but I prefer to write my books and continue my academic life,” he said. “Maybe I can consider this offer in the future.”
If he had accepted, Acemoglu, who became a professor at the age of 33, would have been the first Turkish-Armenian to have been appointed to such a post.
In March, Turkish Foreign Minister Ahmet Davutoglu confirmed the offer, saying that it was “inconceivable” for the government to discriminate between the citizens of the Turkish Republic. “We can appoint everyone [who is qualified] to represent Turkey. In this respect, the main criterion for us is qualification. Indeed, we have offered Daron Acemoglu to represent us at the OECD a few months ago,” Davutoglu said.