The 17 nations using the euro must cooperate more closely and prevent any country defaulting on its debt as that would jeopardize the region’s healthy economies, Turkish Deputy Prime Minister Ali Babacan said.
“No country should be allowed to default because if any country defaults, it is going to hurt overall confidence, and would open the door for more countries to follow the same route,” Babacan said at a press conference in Warsaw today. “It would increase the risk premium of the whole euro zone, and even those countries that have relatively healthy public finances would be hurt.”
Exports to the euro area are important for the Turkish economy, Babacan said, adding that the government may have to lower its 4 percent growth forecast for this year if the situation in the currency bloc worsens. European Union finance ministers will discuss tougher rules on budget deficits at a meeting on Jan. 23, according to a draft of a planned fiscal treaty obtained by Bloomberg News.
“All the countries in the euro zone need to do their homework,” Babacan said. “But there also needs to be a stronger framework for common fiscal policy -- a situation in which there are 17 countries using one currency but with 17 fiscal policy strategies is not sustainable.”