Global Business and Economics Program Director Andrea Montanino and Intern Samuel Dorshimer write for Hurriyet Daily News on the importance of pursuing new strategies to finance economic growth in Turkey and the European Union:
Ahead of its annual meetings in Lima in October, the International Monetary Fund cut its forecast for global growth to a modest 3.1 percent because of slowing growth in emerging economies. In advanced economies, especially in Europe, growth has remained weak since the financial crisis seven years ago and many economies are still struggling to recover. Such sluggish growth raises questions about traditional strategies to jumpstart the economy and underscores the need for new ideas to create and sustain growth.
Traditionally, governments have relied on the public budget and monetary stimuli from central banks to finance growth. Public debt has, however, risen significantly since the financial crisis. According to the World Bank, in the European Union as a whole, government debt as a percentage of the GDP rose from 42.7 percent in 2007 to 73.2 percent in 2014. In countries that were embroiled in the sovereign debt crisis — Portugal, Ireland, and Greece — debt levels rose to over 120 percent of the GDP, significantly burdening public finances.