We shall not pin our hopes upon individual solutions in the period of crisis we are going through. This fact was relevant even for four months earlier, but it is much more relevant today. There exist interrelated problems and there is a need for an economic program that will take into account and at least ease all of those problems - expecting that a program would completely resolve problems would not be realistic - so as to be able to reach the shore (2010).  To clarify the situation, I will enumerate the mentioned interrelated problems once more.

Problem of external sources: First of all, the narrowing down of the global financial markets coupled with the ambiguity in expectations for the future and even for today diminish global flow of funds. In such a milieu, problem to obtain external loan arises especially for the corporate sector and to such extent for banks. While some have hard time in accessing loans under favorable terms, others, despite settling for harsh terms to a certain extent, cannot access ant loans at all.

Problem of confidence:  Secondly, confidence worsens due to both the global crisis and earlier statements underestimating the problems encountered as well due to the fact there is not any announcement for a new economic program yet. And confidence problem leads to other problems or worsen the existing ones in turn.

Problem of domestic credits: The third problem, which is closely related to the worsening of confidence, is that the banks request additional guarantees for the credits they provide due to their own problems (first problem - problem of transfer of funds abroad) and the fall in the asset values throughout Turkey as well because they are aware that the corporate sector will be affected negatively by the current state of affairs. Banks also recall the credits granted and show reluctance in offering new financial sources.

Problem as regards the fall in commercial activities under exchange bills and debentures: The forth problem is that, forward transactions within the corporate sector stop due to the fall in confidence. The use of instruments like exchange bills, debentures and commercial credits fall down. Leading producers hesitate to sell goods to their main dealers and other dealers under payment via those instruments.

Problem of foreign demand: The fifth problem arises as follows: Global crisis leads to bankruptcies resulting in employee lay-offs and rise in unemployment at the global level.  Income levels decrease along with the fall in demand for goods and services. Surviving companies on the other hand, cut down production due to both having problem in obtaining credits and the decrease in demand. In turn, more people lose their jobs and encounter a fall in income resulting in a higher fall in demand. The mentioned developments highly threaten the companies and sectors engaging in export throughout the world. This is also the reason behind the fall in exports and thus, production of Turkey.
Problem of domestic demand: In case of the sixth problem, demand falls due to the reasons listed in the previous item as well because of the worsening of confidence and narrowing of the credits. People that are not able to foresee the future climate postpones high-amount consumptions. People that are to make investments suspend the projects to review them again 'after a while', and consumers willing to spend have problem to obtain consumer credit. Investors that are willing to make investment or not able to suspend investment plans also have trouble in obtaining external or domestic credits. Thus, domestic demand falls down.

Problem of capital: The seventh problem is related to capital adequacy, which is a dynamic concept. Enterprises, though they maintain strong level of capital, are under the risk of suffering from capital adequacy in the future in case aforesaid problems remain present.

Problem of capital inadequacy to arise especially in the banking sector significantly worsens all of the problems stated above.

Problem of interest and exchange rates: The eighth problem is that, no one is able to foresee the future of the interest rate and especially of exchange rates. And this considerably deepens the existing ambiguities and creates negative effects on domestic demand.

Problem of budget inflexibility: The revenue items in the budget are to a high extent shaped in accordance with the changes in the national income of the current period. It means: Since Turkish economy will face negative growth in 2009, budget revenues will be eroded away.

On the other hand, a considerable part of the budget expenditures are inflexible, meaning that the opportunity to retrench the expenditures and replace them with more demand-stimulating ones is limited though existent.

All of these problems are interrelated. This is why a comprehensive economic program pursuing an integrated approach is required. For instance, if there is a risk for the bank capitals to erode away, banks will not offer any credit regardless of whether the government expands the scope of the credit guarantee system and warrant the obligations arising from the credits granted. Reciprocally; why would banks offer credits even they have adequate capital if they are afraid that credits will not be repaid?

Or, if you have an inflexible budget, how much resource will you be able to transfer to improve domestic demand? How can you diminish the ambiguities related to exchange rate movements unless you ease the problem of external sources? Questions can go on like this, let us get back to this issue later.

This commentary was published in Radikal daily on 22.01.2009