What was the magic phrase of the program implemented after the 2001-crisis? It was 'fiscal discipline'. In the aftermaths of the crisis, we first had to put off the fire and cool the climate and then implement the measures to prevent the reemergence of the fire. Putting off and cooling the fire referred to disciplining the fiscal policy to prove that budget deficit and public debt will tend to fall and to saving the banking sector which was on the free fall. Then, it was necessary to ensure the sustainability of fiscal discipline, put the banking sector on its feet and implement the radical institutional regulations that will prevent the occurrence of such unfortunate crisis.

Particularly the process of putting out and to some extent cooling the fire clearly requires immediate action. In other words, you have to operate on the patient immediately. Until after the operation you cannot question why an operation was necessary or implement measures to prevent the emergence of such a disease again. In the context of the fiscal discipline framework, operation or fire extinguishing means controlling and reducing budget deficit 'no matter what'. You have to do this as soon as possible so that the concerns about the sustainability of the process are eased. Only this way you can reduce the interest rate fluctuating at unprecedented levels, reverse the steep upward trend in exchange rate and gain credibility in front of the public.

In the aftermaths of the crisis, the government tried to increase public revenues in the easiest way sticking to the 'no matter what' motto. The same applied also for expenditure reducing measures. This was why additional tax on tobacco and alcoholic products, petroleum products and etc. came on the agenda. It was not a matter of concern that the tax raises affected people in high income group and the poor the same way; because the fire was growing. Nonetheless, we know that the 'quality' of fiscal discipline and how you ensure that quality is also of importance. Moreover, it is important whether or not you ensure the sustainability of fiscal discipline. You can attain the same level of public revenue or public expenditure through different methods. But once the extinguishing and cooling process is over, you have to leave the low-quality method and adopt a securer one.

This is what was designed for the program implemented after the 2001 crisis. Therefore, it was planned to work on and reach results in the subjects of reregulation of the social security system, and restructuring of the tax reform and revenues administration. Some of these attempts were already concluded. However, almost a decade has been passed since the crisis. And look where we are: we are still relying on nonpermanent measures - which should not be permanent indeed - to discipline the budget. Please note that I do not argue these measures are useless at this point. It just does not make sense why we had to implement such measures. If, for instance, Turkey launched a reform that would increase the number of taxpayers without increasing the tax rate in 2006, would we still need this type of 'archaic' measures? It is upon this point where we have to object to recent policy decisions.

This commentary was published in Radikal daily on 07.01.2010