Wednesday, August 11, 2010

Just a small breather- the fiscal rule parody

I am continuing with my archiving process, but wanted to pause for a small breather, as I have a couple of items I need to get out of my system right away.

First, I'd like to share with you my five cents on the fiscal rule. Just to recap: It was announced in the middle of last month that the fiscal rule would be postponed until October, which, along, with the disappointing June fiscal figures, led me to devote my Hurriyet column to fiscal affairs the following week. A couple of weeks later came Fin. Min. Mehmet Simsek's remarks that it wouldn't matter if the fiscal rule weren't approved this year, which, unsurprisingly, was not taken well by the market. The Fin.Min. was quick to note that he was misunderstood, but we first learned about the correction in a note by the J.P. Morgan Turkey economist, who wrote that the Fin.Min. had called him personally to correct the misunderstanding.

It was kind of funny to see a phone call reported in a research note. Knowing that the Fin. Min. had passed on information with potential to affect prices to an investment bank in advance was not. As innocent as this might seem, and although I am sure that things like this happen a lot in advanced countries as well, behind closed doors, I was surprised and a bit disappointed that the media did not approach the incident from this angle...

Finally, it hit the wires this morning that rating agencies were not very happy to the fiscal rule after a minister was honest enough to note that a couple of high-spending ministries had opposed the fiscal rule. A fellow economist who has wrong been critical of the agencies was firing again this morning, questioning Turkey's unfair sovereign ratings. As much he wonders how Turkey is rated below Egypt, I am wondering how the agencies could be so naive about the IMF agreement and the fiscal rule. But maybe the answer is the same to both questions...

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