Roadshow Stop Turkey: The Ankara Launch of the new ECA Flagship report on “Golden Growth” with a new Country Director in Office

After Brussels, Frankfurt and Berlin, Ankara was the next stop for the launch of the newly released ECA flagship report “Golden Growth: Restoring the Luster of the European Economic Model”. On February 1, 2012 lead authors Indermit Gill and Martin Raiser provided a presentation of the findings of the report to a Turkish audience. Co-hosted by the Undersecretariat of Treasury, the event attracted some 100 participants from government agencies, academia, bilateral agencies and the diplomatic corps as well as the media. The launch also provided an opportunity for the new Country Director for Turkey, Martin Raiser, to make his first public appearance before a Turkish audience.

In his opening remarks, Ibrahim Çanakcı, Undersecretary of Turkish Treasury welcomed the work of the World Bank and stressed the timeliness of the report at a time when Europe is in crisis and that the report would be an important reference for policymakers. “Europe is a region that is extremely important for Turkey. We have almost half of our trade and an important portion of our service exports with Europe. Therefore it is of utmost importance for us to see Europe regain stability and start growing again” said Çanakcı.

Martin Raiser, as the new Country Director for Turkey and co-author of the report introduced the background and offered some thoughts on how to link the meaning of the report to Turkey’s own growth prospects and challenges. In particular, the report offers encouraging reading on the potential benefits of integration with Europe, despite recent economic troubles. The report takes a long-term view on growth in Europe, paying special attention to the last two decades, and identifies what needs to be done to assure continued prosperity in the decades ahead. It assesses the six principal components of the European growth model: trade, finance, enterprise, innovation, labor, and government.

Indermit Gill, Chief Economist for Europe and Central Asia and one of the lead authors gave the main presentation on the report. Citing the main findings, Indermit Gill said that most countries in Europe were doing well in trade and finance, many in enterprise and innovation, but few were doing well in labor and government. “So Europe needs many changes to make governments and labor markets work better, fewer changes to foster innovation and productivity growth in enterprises, and fewer changes still to reform finance and trade”. He added that stalled productivity, declining populations, and unsustainable fiscal imbalances have made many changes urgent “One can say without exaggeration that Europe invented a ‘convergence machine’, taking in poor countries and helping them become high income economies” he stated.

To revitalize the European growth model, the report makes three sets of recommendations: restart the "Convergence Machine" that has allowed poorer countries become high income economies; rebuild “Brand Europe” that has helped the region, with one-tenth of the world’s population, account for a third of the global economic output; and reassess what it takes to remain the world's "Lifestyle Superpower", with the highest quality of life on the planet and possibly in human history. All of these recommendations recognize the 'golden' ideals of Europeans who want their economic growth to be better, to be kinder to those that need the most help, to be smarter and to fully respect the environment.

The discussion centered around relevance of the findings for Turkey, the possible impact of the crisis in Europe on Turkey given its dependence on foreign financing, and broader questions of the role of cultural factors and institutions in economic growth. With respect to the last question, Raiser highlighted the significant differences in the effectiveness of governments across Europe which could be linked to deeper institutional factors such as the quality of the public administration and the level of trust in state institutions. . Good governance was clearly a major factor explaining differences in economic performance and variations across Europe were consistent with this view. Raiser also commented on macroeconomic risks associated with large current account deficits against the background of a strong positive association of external financing with economic growth in Europe. He noted that: "Current account deficits reflect the balance of investment and domestic savings. If external capital finances increased investment, this should boost productivity and stimulate sustained growth and convergence. In Turkey, however, some of the deterioration in external balances have resulted from a rapid decline in domestic savings. From this perspective, Turkey clearly should be concerned and take measures to boost competitiveness and the investment climate."

The lively Q&A following the presentation highlighted once again the timeliness and relevance of this Report and the interest of the Turkish audience in developments in Europe and in the broader lessons emerging from Europe’s experience for emerging high income economies such as Turkey.