127 10 3494 https://omeka.ibu.edu.ba/files/original/90cc2e6c5d61303196cae1ac7b01a119.pdf e31c54ff96e238d928ec453c520529bf PDF Text Text Bardakçı, S. (2007) ―The Determination of Optical Properties of TiO2 Thin Film Prepared with Sol-Jel Method ‖, MSc Thesis, Sakarya University, SAKARYA. Soo, W.L. Carlos, M. Joaquin L.O. Seung, H.K. Tohru, S. Koichi N. and Bernard, J.H. (2003) ―Tribological and Microstructural Analysis of Al2O3/TiO2 Nano composites to Use in the Femoral Head of Hip Replacement‖, Wear, 255, 1040-1044. Sathiyakumar, M. and Gnanam, F.D. (2002) ―Influence of MnO and TiO2 Additives on Density, Microstructure and Mechanical Properties of Al2O3‖, Ceramics international, 28, 195-200. Barsoum, M.W. (1997) ―Fundamentals of Ceramics‖, Mc Graw Hill, New York, USA. Kalpakjian, S. (1997) ―Manufacturing Processes for Engineering Materials‖, Prentice Hall 4. Edition, USA. Yıldırım, İ. (2002) ―The effect of Production Condition and Composition on The Strength Properties of Al2O3 and SiC‖, PhD Thesis, Istanbul Technical University, ISTANBUL Aneziris, C.G. Scharfl, W. and Ullridch, B.(2007) ―Microstructure Evaluation of Al2O3 Ceramics with Mg-PSZ and TiO2 Additions‖, Journal of the European Ceramic Society, 27, 3191-3199. Glass Foams Containing Fly Ash And Sheet Glass By Adding Calcite As Foaming Agent Ediz Ercenk1, Gunhan Bayrak2, Senol Yilmaz1, Volkan Gunay3 1Sakarya University, Engineering Faculty, Department of Metallurgical and Materials Engineering, Esentepe Campus, 54187 Sakarya, Turkey, 2Sakarya University, Arifiye Vocational School, 54580 Arifiye, Sakarya 3TUBITAK-MAM, Material Institute, 41470 Gebze, Kocaeli, Turkey Abstract Glass foam is a porous isolation material used for heat isolation. In this study, the possibilities of glass foam production using calcite as a foaming agent was investigated. The mixture was prepared 10% wt. of waste window glass and 90% wt. Seyitömer thermal power plant fly ash. 2.5 to 10% wt. calcite was added to mixture and pressed under 75 MPa pressure by uniaxial cold pressing to obtain cylindrical specimens. Pressed samples sintered at 750-950 °C temperature range for 1 hour according to differential thermal analysis (DTA) results. The effect of calcite addition and sintering temperature on the porosity, density, compressive strength, microstructure and crystalline phases were investigated. It was determined that the 284 �properties of glass foams was changing depend on calcite addition as foaming agent and the sintering temperature. The results showed that calcite provide foaming in specific proportions for glass foam production. Keywords: Calcite, fly ash, glass powder, glass foam 1. INTRODUCTION Calcite is an abundant rock-forming mineral in the Earth's upper crust. It is a carbonate mineral and the most stable polymorph of calcium carbonate (CaCO3). It has a defining mohs hardness of 3, a specific gravity of 2.71, and its luster is vitreous in crystallized varieties. Color is white or none, though shades of gray, red, orange, yellow, green, blue, violet, brown, or even black can occur when the mineral is charged with impurities. The dissolution and precipitation behavior of calcite has been widely studied since it plays an important role in rock weathering and soil chemistry and therefore these processes impose controls on the natural sequestration of CO2. The carbon dioxide gas (CO2) is given off as bubbles and the calcium dissolves in the calcinations reactions. Because of this features, some minerals including carbonate can be used for foaming process (Vavouraki 2008, Wikipedia 2012). Foam glass is a porous heat-insulating and soundproof material, with true porosity up to 90 vol.%. Foam glass is a heterophase system consisting of the gaseous and the solid phases. The solid phase is glass that forms thin walls of single cells several micrometers thick. The cells are filled with the gaseous phase. These materials have many properties such as high surface area, high permeability, low density, low specific heat for high thermal and acoustic insulation and high chemical resistance. Glass foams are resistant to water and water vapor and do not burn. Commercial glass foams exhibit porosity, apparent density and compressive strength values of about 85–95 vol.%, 0.1–0.3 g/cm3 and 0.4–6 MPa, respectively (Fernandes 2009). Several synthesis routes are available to produce foam materials such as bubbles generation in slurries or in a green body during a specific thermal treatment, reaction sintering, sol–gel methods, direct foaming, pyrolysis of organic additives and polymeric sponge method (de Sousa 2008). There are a lot of investigations for production of glass foam materials. To investigate the effect of different additives and different raw materials on foaming process is popular issue, recently. In the current study, the production possibilities of glass foam materials including sheet glass, fly ash and calcite were investigated. It is possible that this study can provide new view point for producibility of more economical glass foam material. 285 �2. EXPERIMENTAL PROCEDURE In the present study, cullet of commercially produced soda lime sheet (SLS) glass and power plant fly ash (Seyitömer-Turkey) were used as raw materials and their chemical analysis was performed by x-ray fluorescence (PHILIPS PW2404). The chemical compositions of fly ash and sheet glass were given in Table 1. and Table 2., respectively. Firstly, cullet glass was crushed and then dry milled using a ring mill (RETSCH). The main mixture was prepared fly ash 10 wt. % and sheet glass 90 wt. %. Calcite was added to mixture in the proportions of 2.510 % against sheet glass proportion in main mixture decreased by calcite addition for using more waste fly ash. Four different compositions were prepared from glass and fly ash with calcite addition by using ball mill for 1 h. The code schedule for samples was given in Table 3. Table 1. Chemical composition of fly ash Oxi de SiO2 Al2 O3 Fe2 O3 Mg O Ca O SO 3 K2 O TiO 2 NiO Na2 O Wt. % 56.8 96 17.2 46 10.6 28 5.13 4.31 2.39 1.55 0.67 0.23 0.31 7 6 8 4 7 6 1 P2O Cl 5 L.O .I 0.12 0.02 0.44 8 8 5 Table 2. Chemical composition of sheet glass Oxid e SiO2 Na2 O CaO % 73.19 5 9.916 8.59 0 MgO Al2O 3 Cl K2O TiO2 Fe2O 3 SO3 L.O. I 5.99 8 0.02 5 0.10 8 0.04 0 0.33 8 0.09 1.515 0.185 Table 3. Sample code schedule 286 Sample code Cullet (wt.%) Fly ash(wt.%) Calcite (wt.%) 25C 87.5 10 2.5 50C 85 10 5 75C 82.5 10 7.5 100C 80 10 10 �In establishing an optimal heat treatment procedure for foam reduction the thermal behavior of glass cullet, fly ash and carbonates lays a key role. Differential thermal analysis (DTA) (SEIKO Exstar 6000) was used to determine glass transition and crystallization temperature for raw materials. The cylindrically shaped samples with diameter of 25 mm and thickness of 15 mm obtained by uniaxial pressing (800 kg/cm2) were sintered between 750 °C and 950 °C for 1 h according to DTA results of sheet glass, fly ash and calcite. To characterize the prepared samples apparent density, porosity, compressive strength and visual observation were performed. Leica stereo microscopy was used for visual studies. X-ray diffraction analysis (XRD) was used for phase analysis and scanning electron microscopy (SEM, JEOL 6060) was carried out for microstructural investigations. X-ray diffraction analysis (XRD) using analyze phases present in the coatings over a 2Ө range of 10o–90o were used for characterization of the glass foam samples. 3. RESULT AND DISCUSSION DTA results of raw materials used glass foam production are shown in Figure 1. Glass transition temperature was determined 550 °C for sheet glass (Figure 1a). Calcite exhibits a strong endothermic peaks corresponding to moments of weight loss (Figure 1b) characteristic of this material. The endothermic peak (790 °C) was due to the decomposition of calcium carbonate (calcite) with release of CO2, according to the Eq. (1). The total weight loss was about 45%. CaCO3 CaO+ CO2 (1) An exothermic peak in DTA analysis of fly ash was detected at 460 °C (Fig. 1c). Accordingly, the weight loss of 3.1% occurs at the same temperature. This exothermic peak occurs due to the unburned carbon reaction in fly ash. In this study sintering and foaming temperatures were selected according to DTA results shown in Figure 1. 287 �(a) (b) (c) Figure 1. Thermal analysis (heating rate 5 °C/min) of (a) sheet glass, (b) calcite and (c) fly ash Tridymide (ASTM chard no: 42-1401), Cristobalite (ASTM chard no: 82-0512), Diopside (ASTM chard no: 75-1092) and Augite (ASTM chard no: 78-1391) phases were determined by XRD analysis. Augite was determine in sample including calsite 10 % but not determined for the sample including calcite 2.5 %. The first significant point in XRD results is that peak intensities and numbers increase with increasing sintering temperature due to better crystallization. The intensities of Diopside and Augite peaks increase with increasing calcite addition and sintering temperature, clearly. The zone under the XRD patterns illustrates glass structure in body. The changing volumes of this zone infer to crystallization. When the sintering temperature was 950 °C, this zone got narrow, markedly. The effect of sintering temperature on crystallization is seen this way, clearly. Especially, Tridymide and Augite are characteristic phases for glass foam material in literature (Fernandes 2009). After the sintering process, dimensional change test was performed for the samples. These results were given in Figure 2. It was shown that there are two important parameters influencing dimensional change. The first parameter is sintering temperature, the second is calcite addition. In general, dimensional change increases with increasing sintering temperature up to 900 °C. Above the this temperature, vitrification effect of liquid phase sintering mechanism cause firing shrinkage due to better sintering. Calcite addition has a positive effect on dimensional changes for calcite addition 2.5-5 %. When the calcite addition increased, dimensional changes decreased because of over gassing reactions. When the reaction between CaCO3 and O2 occurs, CaO and CO2 gases form. Released gas provide softening and expansion for matrix. This mechanism is related to foaming process. When the foaming agent volumes increased excessively, gas pressure increases and the gas bubbles consisting of porosities explode due to high pressure. It is possible that the pressure of CO and CO2 gases force glass matrix and thus, gas pores shrinkage happen (Hasheminia 2012). That the highest dimensional change value is 41.17 % was determined in calcite 5 % reinforced sample sintered at 900 °C. Calcite addition has negative effect on dimensional changes for some situation. 288 �45 Dimensional Change, % 40 35 30 25 20 25 C 50 C 75 C 100 C 15 10 700 750 800 850 900 950 1000 Sintering Temperature, ° Figure 2. Dimensional test results versus sintering temperature The macro photographs of samples can be seen in Figure 3. It is clear that dimensional changes and sintering temperatures increase in direct proportion. Increasing sintering temperature provide better sintering. The highest dimensional changes and the most foaming were observed in samples sintered at 900 and 950 °C. The samples including calcite 5 % were exposed to deformation. At 750-850 °C, pores and cracks on the surfaces formed due to the escaping gas from the decomposition of CaCO3. This situation infers that gas pressures in these samples are maximum point. When it comes to other samples, the volume expanded and the surfaces became smooth with increasing temperature. Figure 3. The macro photographs of samples The curves of porosity values of the samples depending on sintering temperature are given in Figure 4a. Porosity values are correlation with dimensional change results. The highest porosity value was measured in coded 50 C sample sintered at 850 °C. The samples sintered at low temperatures have higher density and lower porosity due to the occurrence of a higher viscosity. The maximum porosity values in this study were calculated as 49.25 % in sample including calcite 5 % sintered at 850 °C. This value for commercial glass foam material is about 85-95 % (Scheffler 2005). The porosity values are correlation with macro photographs of samples. The samples containing higher calcite content have lower porosity values. 289 �The density changes with sintering temperature are shown Figure 4b. The lowest density was measured as 0.43 gr/cm3 in 25 C coded samples sintered at 850 °C. The samples including calcite 5 % sintered at 800-850 °C have lowest density because of their pore structure. In these samples, pore size is not big compared to other groups but pore numbers are too much, comparatively. Density values in commercial glass foams are about 0.1-0.3 gr/cm3 (Scheffler 2005). Apparent density of the glass foam obtained from glass-calcite mixture is about 0.4-1 gr/cm3. The density increases with increasing calcite addition. Extensive calcite addition cause negative effect on foaming process. Higher sintering temperatures have similar effect on foaming and densities due to better sintering and lower viscosity. 1,2 60 25 C 50 C 75 C 100 C 1,0 Density, gr/cm Prosity, % 3 50 40 0,8 0,6 30 25 C 50 C 75 C 100 C 0,4 20 0,2 700 750 800 850 900 950 700 1000 (a) 750 800 850 900 950 1000 Sintering Temperature, ° Sintering Temperature, ° (b) Figure 4. a) Porosities versus sintering temperature, b) Density values versus sintering temperature The curves of compressive straight depending on sintering temperature were given in Figure 5. These results are correlation with porosity and density values. Porosity values are inversely proportional to the compressive strength. Compressive strength decreases with increasing the amount of porosity. The highest compressive straight values (4.75 MPa) are gained from the samples including calcite 10 %. In general, compressive straight decreases with increasing sintering temperature. Calcite addition has adverse effect compared to sintering temperature effect. 290 �Compressive Streight, MPa 5 25 C 50 C 75 C 100 C 4 3 2 1 0 700 750 800 850 900 950 1000 Sintering Temperature, ° Figure 5. Compressive straight versus sintering temperature Figure 6 shows the typical aspect of the glass foams of all the investigated compositions. The amount of calcite in the batch considerably affects the size and the shape of the pores. In general, the glass foam samples have inhomogeneous microstructures with irregular pores with a high scattering in their size (0.1–1 mm). Some pores were smaller than others, these pores were then sealed by the glassy phase when the sintering temperature increased due to the increasing viscosity. Since the addition of more calcite produced more gas, the pores became larger, suddenly. This situation is also observed in similar studies (Fernandes 2009, Bernardo 2007, Chong Liao 2012). Figure 6. Stereo microscopy visions of samples of cross-section surface 4. CONCLUSION XRD analysis showed that Tridymide, Cristobalite, Diopside and Augite crystalline phases formed in the glass foams. 49.25 % is the highest porosity value in coded 5C sample sintered at 850 °C. The lowest density 0.43 gr/cm3 was measured in coded 25C sample sintered at 850 °C. The porosity sizes increases with increasing sintering temperature. In the same time, calcite addition has a positive effect on foaming process in general. But calcite addition caused adverse effect on foaming process in some condition due to gas reactions. Micro and macrostructure analysis shown that the pore sizes and shapes are very irregular and the structures seem inhomogeneous. 291 �REFERANCES Vavouraki A. I. Putnis C. V. Putnis A. and Koutsoukos P. G. (2008) An Atomic Force Microscopy study of the growth of calcite in the presence of sodium sulfate, Chemical Geology, 253, 243–251. http://en.wikipedia.org/wiki/Calcite (2012). Fernandes H.R. Tulyaganov D.U. and Ferreira J.M.F. (2009) Preparation and characterization of foams from sheet glass and fly ash using carbonates as foaming agents, Ceramics International, 35, 229–235. de Sousa E. Rambo C.R. Hotza D. Novaes de Oliveira A.P. Fey T. and Greil P. (2008) Microstructure and properties of LZSA glass-ceramic foams, Materials Science and Engineering A, 476, 89–97. Hasheminia S. Nemati A. Eftekhari Yekta B. and Alizadeh P. (2012) Preparation and characterisation of diopside-based glass–ceramic foams, Ceramic interanational, 38, 20052010. Scheffler M. and Colombo P. (2005) Cellular Ceramics: Structure, Manufacturing, Properties and Applications, wiley-vch verlag gmbh&co. , Weinheim. Bernardo E. Cedro R. Florean M. and Hreglich S. (2007) Reutilization and stabilization of wastes by the production of glass foams, Ceramics International, 33, 963–968. Liao Y.C. and Huang C. Y. (2012) Glass foam from the mixture of reservoir sediment and Na2CO3, Ceramics International, 38, 4415–4420. Sustainable Urbanization And Ecocities Çiçek Eda, Demirkiran Özlem, Süleyman Demirel University, Isparta, Turkiye E-mails: edacicek@sdu.edu.tr,ozlemdemirkiran@sdu.edu.tr Abstract Nowadays, fears about leaving a liveable world to next generations are increased. While sources are decreasing rapidly, demands are increasing more swiftly. In order not to restrict next generations‘ right to live, some measures must be taken. At this point, sustainable urbanization concept came forward. Therefore the governments brought ecocities to agenda. In this study, the phenomena of urbanization, sustainability, sustainable urbanization are examined briefly. Problems caused by urbanization are detected. And the ecocity approach that implemented for the realization of sustainable urbanization is discussed. Lastly, sample ecocities from different places are dealt with. 292 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 1258 Title A name given to the resource Glass Foams Containing Fly Ash And Sheet Glass By Adding Calcite As Foaming Agent Author Author Ediz , Ercenk Abstract A summary of the resource. Glass foam is a porous isolation material used for heat isolation. In this study, the possibilities of glass foam production using calcite as a foaming agent was investigated. The mixture was prepared 10% wt. of waste window glass and 90% wt. Seyitömer thermal power plant fly ash. 2.5 to 10% wt. calcite was added to mixture and pressed under 75 MPa pressure by uniaxial cold pressing to obtain cylindrical specimens. Pressed samples sintered at 750-950 °C temperature range for 1 hour according to differential thermal analysis (DTA) results. The effect of calcite addition and sintering temperature on the porosity, density, compressive strength, microstructure and crystalline phases were investigated. It was determined that the properties of glass foams was changing depend on calcite addition as foaming agent and the sintering temperature. The results showed that calcite provide foaming in specific proportions for glass foam production. Keywords: Calcite, fly ash, glass powder, glass foam Date A point or period of time associated with an event in the lifecycle of the resource 2012-05-31 Keywords Keywords. Conference or Workshop Item PeerReviewed H Social Sciences (General),Q Science (General) https://omeka.ibu.edu.ba/files/original/7f0a546ee7265457301d3efb10c39f35.pdf 29b788873c2f5efa1834ff7766388db4 PDF Text Text International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo Global and State Policy and Modern Financial Crisis Izet Ibreljid Faculty of Economics, University of Tuzla ibreljic@yahoo.com Amra Nuhanovid Faculty of Economics, University of Tuzla amra.nuhanovic@untz.ba Lately dominates the impression that most holders of economic policies at the national and global level are not willing to give up his rigorous attitude and follow the recommendations on which there is scientific consensus is evident. However, consistent with considerations of instructions that the economics have been offered, would significantly reduce the frequency of crises and the damage that they bring with them. Until today the variety of conclusions are crystallized. Speaking of preventing financial crisis and its practical implementation in the process of creating the optimal macroeconomic policy is a priori highly desirable. So in the United States adopted a plan that aims to redeem the State risky investment, while the EU has a similar situation, because there are also carried out bank recapitalization. Considering the above, the paper analysed and presented the main activities undertaken on the road to recovery from the effects of the global financial crisis, as well as the latest developments in the global market, with special reference to the Euro zone. Keywords: World Economic Policy, G-20, World Economic Crisis, Answers, Challenges. 179 � https://omeka.ibu.edu.ba/files/original/ea73a42ce8f6cc19a961e1af47bd8f5c.docx ceb5353539396263dd206fa590282468 https://omeka.ibu.edu.ba/files/original/f08640923995480cfc27568206ab616b.pdf 149a074abb396820e02b9c7df0f09bed PDF Text Text International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo Globaland StatePolicy andModern FinancialCrisis Izet Ibreljic Tuzla University, Tuzla, Bosnia and Herzegovina ibreljic@yahoo.com Amra Nuhanovic Tuzla University, Tuzla, Bosnia and Herzegovina amra.nuhanovic@untz.ba Abstract Latelydominates the impressionthatmostholdersofeconomicpoliciesat the national andgloballevelarenotwilling togiveuphisrigorousattitudeand follow therecommendationson whichthereisscientific consensusisevident.However,consistentwithconsiderationsof instructions that the economicshave beenoffered,wouldsignificantlyreduce the frequencyofcrisesandthe damage thattheybring withthem.Untiltoday thevarietyofconclusionsarecrystallized.Speaking of preventingfinancialcrisisanditspracticalimplementation intheprocessofcreating theoptimal macroeconomicpolicyisa priorihighlydesirable.So intheUnitedStatesadoptedaplanthataimsto redeem theStateriskyinvestment,whiletheEUhasa similar situation, becausetherearealsocarried outbankrecapitalization.Considering theabove,thepaperanalyzedand presentedthe main activities undertakenontheroadto recoveryfrom theeffectsof theglobalfinancialcrisis, aswellasthelatest developmentsin the global market, withspecialreferenceto the Eurozone. Keywords:world economic crisis,answersandchallenges. policy, G-20, world economic JEL:F01, F44 Multilateraleffort prevention plantofinancial crisis Giventhatthemaincauseofmarketfailureeveryfinancialcrisis,theanti-crisispolicy is limitedmainlytotakeurgentmeasurestostopthecrisis,toreduceitsnegativeeffects,totake theactionsnecessary tosustaintheeconomy incrisis,aswellasqualitativemeasuresto overcomefromthecrisisandrestoretheeconomytoapathofsustainabledevelopment. Recentfinancialcrisis hasshownthatthemarketsystemisalongandindulgenttobe deformedinsomeimportantsegmentsinwhichitisnecessary topointout.Onthisbasis, marketfailureshaveledtothecrisis.However,inthelastfinancial crisishavenot yet discoveredalltheshortcomingsofthemarketandtherefore theanswertothecrisisisnot definitive. Whena crisisoccursinone sectorof the economy,there isincreasing unemployment,createssocialproblems,etc.The oppositeis theprocess ofovercomingthe crisis,withtherevivalofproductionincreasesemployment,economicactivity isgradually 1 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo returningtonormal,etc.Thisleadstoconclusion thatthecentreofactionagainstthestateof thefinancialcrisis,theeconomy andfinancialinstitutions.Therefore,inmostcrisesinthe economy requirescoordinatedaction by allparticipantsinthefinancialmarkets,whichhave beenaffectedbythecrisis.Itcoversawiderunderstandingandcreationofstrategies,plans and programs out of the financial crisis, then the achievement of political stability, the adoptionofspeciallaws,acts,conductsupplementary budgetandchangesinmonetary policy (IMF, (2009), p.116). Recoveryfromthefinancialcrisismay helpbetterexternalfactors,suchaseconomic growthorgrowthintheworldprice,andthereturnofcapital.Domesticfactorsofrecovery fromthecrisis areconsideredexternaladjustment,realcourses,lowinflation,etc. However, one shouldtakeinto accountother effectsofthecrisis,such asthesize of the public debt,low capacityutilization,discreditedreforms,highunemploymentandsocialcosts.Inthiscase,the policiesthatarerecommendedforrecovery fromthecrisisandeconomicgrowthasfiscal discipline,increaseexports,supportinstitutionalreformandsocialpolicy.Simply put,fiscal policy mustworktoreducefiscalpressureandprovidefiscalincentivestotheeconomyand monetarypolicyshouldhelptomaintaintheliquidity offinancialinstitutions,reduceinterest rates, and securelendingactivityof financial markets. Initialreactiontotheoutbreakofthecrisisfocusedonstoppingthe spreadofpanicand crisisinthemaintenanceofdemand(orpurchasingpower), whichusedthefundsfromthe budget,the CentralBank,theIMF,andother regionalfinancialinstitutions,whichhave the taskof providingfinancialassistance.Whenit comestothepsychologicaleffect,expressed panicinacrisisthatmakesthesituationevenworse,itisnecessary totakeonthe crisisfairly, transparentlyandtimelyinform,whatisthebestway tocombatthespreadofthefinancial crisis.Along with that, we havetomakeastrategyto stop the withdrawal of funds from banks andother financialinstitutions,anddetermineguidelinesforthetreatmentofshares,stock exchangesandsecurities.Further,it mustbe toworktowardsthestabilizationofthenational currencyandinpreventingspeculationloans,shares,realestate,currencies,etc.Ofcourse, thecrisismustbedesignedandrealisticadjustmentpolicies,whichfora givenperiodrequires savings,rationalization,denial,etc.Itshouldbebearinmindthattimeandadjustingthe resultswillbe thesameinallcountriesandbusinesses.Instrongereconomies,therecovery processisusuallyfaster,butitwillwithdrawandrecoverothers.Therecovery ofthe developingcountriesislonger andmore difficult,because theirgovernmentandtheeconomy weakenoughtoimplementeconomicreformsresolvemarketfailuresandeffectively pulled outofthecrisiscountry.Inthisconnection,there isalwaysa crisisshouldstrivetoprepare systemsolutionsandcustomize themactive economic policiestoovercome the crisis.These are institutionalandotherqualitativechangesineconomicandfinancialsystemsthathaveto provide sustainableeconomicdevelopmentwithout crises (IMF, (2009), p.117). The choiceofeconomicpoliciesinthefightagainstthefinancialcrisisdependsonthe natureofthecrisisanditsdepth.Fiscalrestrictionsmay be necessary,ifwekeepinmindthat thecrisisisoftenassociatedwithexpansionaryfiscalpolicy.Restrictivemonetary policy can alsohelpintheeliminationofmarketpressures.However,thecriseswhichare inseparable fromtheproblemsofliquidity andsolvency,thecentralbankmustbepreparedtoprovidethe resourcesandsupportbankliquidity,butalsoto protecttheroleofdepositorstokeeptheir trust.Suchpoliciesusually involvehighcostsanddonotprovideasafeeconomicrecovery. Therefore,itwould bemoreappropriateinthesecases,monetary expansionthatfacilitates 2 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo lending and lowers the cost of capital throughout the economy. Incentives,whicharestrongly takeninlate2008andduring2009havecontributedto mitigatingtheeffectsoftheglobalfinancial crisis,especiallystoppingdeepereconomic downturn.However,outofthecrisisshouldbe change investorbehaviorthrough institutionalandregulatory reform,changesinthestructureofconsumptionandproduction, andimprovingtheworld'sfinancialsystem.In ordertoreturnconfidenceinfinancial institutionsandfinancialinstrumentsisnecessary tocleanthecontaminatedassets,changein behavior offinancial institutionsand thestrengthening ofmanagement in thefinancial sector.Consideringtheabove,thefollowingfigureshowsthefunctionalmodelofresolving the financial crisis. Figure1 Functionalmodelto solvefinancialcrisis ANSWERSOFWORLDECONOMICPOLICY THEFINANCIALCRISIS GLOBALPLAN FORREFORM WORLDECONOMY NEWINTERNATIONAL FINANCIALARCHITECTU RE REFORM Regulationand supervision ofthe bankingand financialsystem IMF FINANCIAL STATE INTERVENTIO N GLOBAL RISK REDUCTIO N WORLD MACROECONOMIC MANAGEMENT Fiscal discipline Increasingexports Socialpolicy BANK Measures and activities ofglobal andnationaleconomicpoliciestocurb the financial crisisare:(1)Globalplantoreformandrevitalizetheworldeconomyandthecreationofa new international financial architecture, including: transparency, accountability, implementationof internationalstandardsandcodes,public debtmanagement,financial regulationandsupervision,fiscaldiscipline, strategy,selectionof appropriate exchangerate policy,socialprotection,thefightagainstmoney laundering,theestablishmentofflexible creditlines,reformtheIMF, WB,promote greater participationof the private sector, strengtheningthe bankingfinancialsystemtoreduce public expenditures(expendituresfor salariesofemployeesinthepublicsector,anda numberofsocialrightsandsocialtransfer payableby government)thatarenecessarytoreducethetaxburden...(2)Financialpointof stateinterventionmeans:turningdowninterestrates,liquidity credits,reductionofrequired reserves, facilitating access to credit forthe central bank in orderto provideadditional liquidity intheglobalandnationalfinancialsystems,strengtheningthesystemofdeposit insurance,becauseofthegreatersecurityforinvestorsandreducepanicandpressureson bankliquidity,theintroductionofthegeneralguarantee ofbankdebt,topreventthespread of the crisisand the collapse of banks,aswell asspecial guaranteesforinterbank claims, measurestounblockcreditandacceleratingthe processof lendingwhichstimulatethe economy.It is evidentthat theU.S. and Europe and otherdeveloped countries havedecidedto intervenetaxpayerfundsorthebudgettostop andpreventthespreadofthefinancialcrisisor 3 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo panic,contagion,illiquidityandinsolvency,causedbythefinancialcrisis.Fundinginthis case,may beinvestedinthreeways:throughloansthebudget-givenwiththecontrol efficiencytheirusewithabusinessplan,participationinthecapitalofthebankorcorporation whereby thestateprovidesprofitsharingandmanagementofcertainbanksorcorporations, andthenationalization ofthebanks (asinFrance). (3)Reductionoftheriskofglobal outbreak of thefinancialcrisis. Assoonasthesixprimary prescriptionsforreducingriskofanoutbreakofthefinancial crisis:1.avoidovervaluationof the localcurrency,allowing ittogovern itfluctuates,2. maintaining a high level of foreign exchange reserves, 3. the maintenance of a healthy banking system, while eliminating thecurrency, interest and conscripts disagreement, 4. activemanagementof balanceandparticularly off-balancesheetassetsandliabilitieswiththe surveillance techniquesandstresstestsona microandmacro level,5.avoidinghighinternal andexternaldebt,especiallywhenitcomestotransformingtheobligationoftheprivate sector, and finally(6)implementation of control of capital movements. Internationalscenarios formitigationconsequences offinancialcrisis Economichistory remembersthelargenumber offinancialcrises,whichiswhynevertoo early tobeginworkonitsprevention.Itisbelievedthatthepreventionandmitigationof financialcrises successful whenthecrisiscomes.Iftakethe interventionofthe financialcrisis intheearly stages,itwillsurelyberelativelyefficient,butastimepassesthecostsof interventionandpreventionofexponentialgrowth.Successofmitigationofthefinancial crisis is difficult to assess, since they register only failed attempts. Until today, many proposedmeasuresinorder tominimize thefinancialcrisis,whichcouldinthe futurehave strengthened thecurrent globalfinancial architecture,and improve itsfunctioning.This includes, roughly speaking: (1) increasingthetransparency of internationalmonetary relations,(2) strengtheningthe bankingandfinancialsystem,and(3)promote greater participationoftheprivatesector.Increasedtransparencyisakey reform,becausefinancial markets cannot functionwithoutadequate, reliable and fastinformationavailable. Foreign investorsthroughtransparencycaneasilyseewherepotentialproblemslieandavoidthe excess funds in areasthreatened bythecrisis(Soros, 1998, p. 134). Anotherwaytoimprovethepreventionoffinancialcrisesistostrengthenthebankingand financialsystemsindevelopingcountriessoastoimprove the supervisionandprudential standards,toensurethatthebanksmeetcapitaladequacy requirements,introduceadequate penalties for bad loans, print and qualify reliable information the lending activities of countries,etc.Weaknessesbankingsystemsarecommoninalldeveloping countriesoverthe pastdecades havepassedthroughthecrisisoflarge proportions.InthisregardtheIMF has introducedstandardsandcodesofgoodbusiness practiceintheareasofaccounting,auditing, corporate governance,paymentsystems,insurance andbanking.Thethird methodof preventioninthecrisisintheeconomyisgreaterprivatesectorinvolvementintheresolution offinancialcrisesindevelopingcountries by makingloanstorebuildandre-negotiateorwill beprovidednewsources,andnottoimmediatelyfleethecountry,asapreconditionfor officialaidfromtheIMF.Theessenceisthatborrowerstakesomeresponsibilityforthe crisis,if yougivetoo muchshort-termloans tounproductivepurposes. Inotherwords, 4 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo borrowersshouldbe"takenout"ofthecrisis,ratherthanbeallowedtoeasily getoutofthe country.Inthisregard,theIMF hasproposedthe creationofa sovereigndebt restructuring mechanism forthe rapid restructuring of debts in developing countries, which havethe problem of external debtsustainability. Thefinancialanalysismustalwaysbearinmindthefactthat,evenifyouapply allthe reforms,itcannoteliminateallfuturefinancialcrises.Whatwe canhopefor isthatthose reformswilldiminishorreducethefrequency anddepthofthecrisisinthefuture.Becauseof thefrequency ofglobalcrisisinthefinancialmarkets,many countriesandtheirgovernments havecreatedtodate,accordingtoownexperience,differentversions ofthescenarioof recoveryoftheworldeconomy (Ohmae,(2007)):(1)Americanscenario:Scenariosuggeststhat inallthestatesnecessary to increasedomesticdemandinordertoprovide thegrowth ofGDP. According to thisscenario are the best-knownandproposalsNobel laureates,suchas:PaulKrugman, (inorder toachievegoodeconomicresults,whileproviding assistancetoindividuals,advisesthatthe ruling administration quickly startswithstrong financial regulation,andCongresstodraftaplan of financial incentives,which shouldbe focused onconsumption.Theadministrationwillhaveto deal withmortgages,toreviewtheconditionsofthemortgageloan,yourproperty andstructuresthe significantcontrolthatwenowhaveinthefinancialsectorinawaythatwillallowprivatecapitalto re-enter thatsphere when theBOPisthecompany getting better), JosephStiglitz believesthat the recovery ofmoresubstantialinvestmentsininfrastructure,technology andalternativeenergysources, EdwardPrescot,saidthatresearchhasshownthattaxratesareakeyfactorindeterminingthe economichealthofdevelopedcountries,andthewillingnesstotakerisksandproductivity-the enginesofeconomicgrowth,whilehightax ratesare asureway ofchoking theengine,MasckinEricksaysthatcreditmarketsrequiregovernmentintervention,EdmundPhel pspointedoutthat lack of control in themanagementofequity causesmany problems,Claiv Gotzangerproposedinjectionof funds into thebanks.(2)Russianscenario:Proposes toholdnewBreton Woods,inordertoprevent thatacurrentbackupdollarworldcurrencyleadtothecollapseoftheentireworldmonetarysystem. Topreventthisfrom happening,weshouldintroducearegionalreservecurrency,and,sinceRussiais thethirdcountryintheworldforforeigncurrencyandgoldreserves,itwasdecidedthattheservice willgrowintoastrong regionalcurrency.Inaddition, thescenario insistsonarranging andorganizing nationaland internationalregionalinstitutes, thentilting large imbalancesbetweenvolumeof issuance offinancial instrumentsand real incomepossibilitiesofinvestmentprograms,andto increasethe accountabilityofpublic companiesbefore the shareholders, to strengthen the riskmanagementsystem, andthedisclosureof informationcompanies.(3)Chinesescenario:According totheirscenario, the Chinese government is to overcome the negative effects ofthe crisis,a package of$ 586 billion dollars tofinanceinvestmentsininfrastructure,socialwelfarepayments,developmentofSMEs,andplan ned toincreasedomesticdemandby lowering taxesof17.6 billiondollars.Inthiscontext,Chinawillbe in thenextfewyearstoturn moretowardsagricultureandruralareas,asintheindustry,according to Chineseeconomists,thereisthegreatestpotentialfor 5 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo stimulatingdomesticdemandandprovidingthe basis forastableandrelativelyrapid economic growth. Any formofinternationalcooperationbetweencountriesshouldleadtosomeproposals thatwouldpartially undertakeinresponsetothechallengesoftheglobalfinancialcrisis.In connectionwiththis,inthe previoustable presentstheinternationalscenariosforpossible solutionstothefinancialcrisis,which,unfortunately,have notyetbeenfinalizedand unanimously accepted.OneofthemisalmostimpliedpropagatedactionFedapproval1,000 billiondollarstorescuebanks(700billiondollarsforFanny MeeandFreddyMec,and300 billiondollarsforCityGroup)aswellasnationalcorporationsandtheautomotiveindustry. Also,severalexpertssuggestedthescenariowiththedivisionoftheworldintothreeblocksof countries(Eastern,AmericanandEuropean),while othershavesuggested acompletedivision oftheworldinwhichthere willbenocommonblocksandinstitutions.Eachcountry,inthis finalversion,I hadtotakecareofthemindependently,whichmeansthatthestatehas strengthened tothemaximumimpactonthe economy. However, withexistingsevere financialproblemsduetothestrugglefor theredistributionof theworld'sresources,there wouldbeanincrease ininternationaltensionsandeven armedconflict.Onthisbasis,the naturalconsequenceof the newsituationontheworldeconomic scenewouldweakenthe influenceofdollars, whichwould no longerbe theworld'sreservecurrency.At the same time, wouldreducetheimportanceoftheeuro.MostoptimisticscenarioisoneinwhichtheU.S. hadsuccessfully overcomeavery seriouseconomiccrisis,whileBrazil,Russia,India,China managedtocopewiththeeconomicslowdownandaccepttheworkofcommoninternational financialinstitutionsasthebestremedy tosolveproblems.Especially,therearescenarios Chinese government,becauseitisfocusedonmeasurestoencourageitsconsumption(i.e.the abolitionof taxesonsales of cars withsmallengines, 74millionpeople withlowincomes wouldreceive the appropriate subsidies,retiredstate employeeswillreceive inadditiontoa pension,12millionteachers willreceivea highersalary,etc.). However,inthisvariantof the real economicpowerand still be on the fast-growing economies. Preventivemeasurestaken by governmentsandcentral forleaving the worldfinancialcrisis banksinsome countries Sincethelastfinancialcrisishitthewholeworldeconomy,manygovernmentswere forcedtorescuetheinternationalfinancial system,withpriority giventoensureeconomic recovery.Inthisregard,anumber ofmeasures were takentoimprovethefinancialstability, includinginjectingcapitalintofinancialorganizations,a significantexpansionof guarantees forbankliabilities bythecentralbankrecapitalization,andvariousliquidity programs.Ontheglobalfinancialcrisisarethe firsttomeetthegovernmentandthecentralbanksof developed countriesandthemeasurestakenincreasedmarketliquidity,primarily byreducingthebasic interestrateandthrowlargeamountsofmoney intothefinancialsystem.Stateaidpackages are rehabilitatedlossesoffinancialinstitutionsandstrengthenedcore capitalfor the credit function ofbanks,whichhaveabusiness perspective. Financial assistancewas providedfunds of state financialinstitutions. In additiontothe recapitalization were used, and other measures,suchasvarioustypesof guaranteesof interbanktransactions,the purchase of 6 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo troubled assetsfrom banks,toguaranteethedebtsoffinancialinstitutionsandcompanies,etc. Thedecisionsofcentralbanksonsecuringliquidity andmeasuresofloanguaranteefinancial sectorby thegovernmentandparliamentsofmostcountrieshaveprovedtobeeffectivein preventingthecollapseof the globalfinancialsystem(FSA, 2009,p.45).Indeveloping countries, governments have had to confront the economic slowdown through monetary policy,supportprogramsfor jobcreation,expansionof socialsecurity, etc.Inaddition,the governmentundertook awide range of measurestofacilitate financialproblemsof business, improvebusinessenvironment,fiscalandother incentives.Sectormeasuresarefunneledinto thehardest-hitsectors,especially intheautomotiveindustry,constructionandtourism.In general,thecurrentactionplanscoordinatedgovernmentsofaffectedlastworldfinancial crisis were aimedat:theefficient operations ofthe regulated financial markets, greatercontrol rating agencies, greater regulation of speculative hedge funds and other previously unregulatedfinancialproducts,harmonizationof accountingandauditingrulesempowering theIMF, etc. However,thereisnosinglemodelisapplicableandeffectiveforeachcountry.Common toallrecovery plansthatincludemeasurestorestoreliquidity.Thebasicdifferencebetween therecovery plansofindividualcountriesrelatestowhetherornottheirfinancialsectorwas directlyexposedtothetroubledsecurities.Therefore,twogroupsofcountriessuchasthe USA,GreatBritain,Germany,Austria,Italy, Sweden, France,Russia,whose financialsector hasbeendirectly exposedtotroubledsecuritiesandwhoserecovery plansmustincludethe funds needed to recapitalizebanks. Theseare recoveryplans inwhich theywriteoffthelosses ofthebankingsectorandreducethecapitalbaseofbanksandtheircreditcapacity.In additiontosupportthe recapitalizationof banksbankingsystemincludessignificantfunding forinter-bankguarantees,inordertohelprestore thecreditmechanismandconfidenceinthe bankstotheeconomyrestarted(FSA,2009,p.46). Thesecondgroupconsistsofcountries whose bankswere not exposed to troubled U.S. securities, such as Poland, the Czech Republic,SlovakiaandSlovenia,whichhaveahealthy banking system,butitisacrisis involvesexternalshocks.Theyare alsodirectlyexposedtotheproblemsthatare happeningin thefinancialmarketoftheEU,especiallyhamperedtheinflowofforeigndirectinvestment andadropinforeigndemand.Theirrecoveryprogramsweremainlyfocusedontheprovision offinancialassistancebycentralbanks,particularlytheEuropeanCentralBank.Evensome of themhaveextendedschedules insureddeposits,tocover alarger depositpotentialandnew financialinstitutions.Indoingso,somebanksare recapitalized,andtheother isthestate boughtone package of shares.Increasedthenumber of securitiesthatthecentral bank accepts whenapprovingyour loanapprovedandwithita significantamountoffunds the banking sector.Governmentsofdevelopedcountrieshaveprovidedforashortperiodoftimedifferent incentivepackagestohelp inordertomitigatethenegativeconsequencesoftheglobal financial crisis.This packages contented:infrastructure technology, energy,unemployment, budget deficits, tax cuts, rural areas, technological innovation, sustainable development, socialprotection,green technology,pension systems,etc.ThefinancialsectorsoftheUnited Kingdom,Germany,Austria,Italy,Sweden,FranceandRussiawere directly exposedtothe toxicassets,andrecoveryplansareprimarilyincludedfundstorecapitalizebanks.Besides,banks also included funds for inter-bank guarantee in order to help restore the credit mechanismand confidencein thebank to get theeconomygoing again. 7 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo So,itwasastate-ownedfinancialsectortopreventavarietyofbankruptcy. Inthis connection,thelargestpackageoffinancialassistanceprovided by theU.S.Government(787 billiondollars)andtheGovernmentofChina(586billiondollars). (FSF,(2008),p.4).In addition,thecentralbanksofthedevelopedcountriesaremitigatedmaximummonetary policy by loweringbenchmarkinterestratesandtakenothermeasuressuchasthepurchaseof governmentsecurities,bonds,andevencompanieswiththeaimtolaunchhaltedactivity on worldfinancialmarkets.Consideringtheinsufficientrecovery oftheU.S.economy,theFed hasdecidedthatthenexteightmonths"tofillin" 600billiondollarsto theU.S.securities markets,inordertoencouragetherecovery oftheAmericaneconomygottired.Immediately there wasa rise inoilprices,the valueof sharesonthe stockmarketandthe strengthening euro.UrgentnecessityofeconomicincentivesintheU.S.hasbeenrecognizedduringthe Bushadministrationinearly 2008.Eventhenforthispurposeapprovedapackageworth168 billiondollarsorslightly morethan1%ofGDP.However,thefirststimulusdidnotprovide anythingmorethanatemporary andshort-termreliefinthefinancialsystemandthehousing market. EconomicincentiveIIoccurredduringtheObamaadministration(Recoveryand Reinvestment Act of2009, ARRA). Theplanincluded the over 800billion. dollars (about 300 billionrelatedtotaxrelieftocitizensandbusinesses,250billionwent tostateandlocal governments with financial problems, 150 billion variety of infrastructure projects, 100 billionadditionalsupporttoworkerswhohavelosttheirjobs,etc.) (Zandi,(2010),p.229).In addition, the Act of the emergency economic stabilization USA which is the de facto approved 700 billion dollars(Zandi,(2010), p. 230).On the basisof thisplan, executed the purchasetroubledassets,especiallymortgagecoveredsecurities,whichrecapitalizedfinancial institutions.Inotherwords, the site wasclearedof non-coveredbanksof their assetsby purchasingsecurities,torevivethecreditmechanism.NotingtheU.S.aidpackagewould needtoincludetemporary taxcuts,investmentininfrastructure,aidtocitizenswholosttheir home, etc. Maincountriesanti-crisismeasuresmemberstatesoftheEU Asfortheindividualanti-crisismeasuresthatweremadeatthelevelofthegovernments oftheEUmemberstates,mostcountriesimplementedtheausteritymeasurestoreducepublic debtandensuremedium-termfiscalsustainability.Mostofthelessdevelopedmembershad or continuestohave programsof budgetsupportthroughtheIMFloan,whichinclude savings programsandstructuralreforms.Inordertoreduce thenegative impact of the globalfinancial crisis,a number of Europeancountrieshaveincreasedtheamountofguaranteeddepositsin banks.Thus,theEuropeanCommission5thDecember2009issueda declarationonthe recapitalizationofbanksinordertopreserveandsmoothfunctioningof theworldfinancial markets(theso-calledEuropeanEconomicRecovery Plan,EERP).Untiltheabovedate,the Commissionhasalready approvedrecapitalizationschemesinthethreemembercountriesas wellassomeindividualbanks'recapitalization.However, given thatthenature,scope and conditions of recapitalization mayquitedifferentfrom casetocase,the EUmember statesand individualbanksrequiremoredetailedguidancefromtheCommissiononthepossibility of recapitalization.Asthemostimportantobjectivesoftherecapitalizationare listedrestoring financialstability andconfidence,establishsmoothfinancingoftherealeconomy aswellas the prevention of systemic adverse effects due to the insolvency of individual banks. However,they areidentifiedandpotentialrisksforthecompetitivenessofthebankingsector, 8 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo onthreedifferentlevels:(1)bankrecapitalization inoneMemberStatecannotgiveanunfair advantageoverbanksinothermemberstates,(2)withinonecountrydoesnotgiveanunfairadvanta getobanksinrelationtoothers,and(3)capitalincreasemay notbeplacedinaless competitivepositionofthosebanksthataretryingtoborrowonthemarket,orshouldaspire togovernmentrecapitalizationtotheleastextent displaceprivatesectorNotwithstandingthe strengtheningof interventionistpoliciesandprotectionism,theEU continuedtosupportthe policyofopenmarkets,growthandprosperity.Accordingly,mostoftheEUplanproposes thefollowing:efficiently creatingplansforsavingpublicbanks,centralbanksshouldtakeon therole of clearinghousefor interbankmarkettoagainrestoreconfidenceamongcommercial banksandestablishedasystemofinter-banklending,itisnecessary toimplement rehabilitationprogramstoincrease GDPinthe EU countriesand accelerate the reformof the financial incentivemarkets.Inaddition,proposednewlegislationoneconomic governance. Specifically,itistougherpenaltiesagainstEUmemberstatesunlessit isdemonstratedby controlling publicfinances. Penalties will be at 0.2% of GDP,while in the process of punishmentwillbe includedinthosecountriesthatfailtocontroltheirannualspendingor reforming the economyin order to improve competitiveness. Itisnecessary toemphasizethattheaforementionedmeasures,includedintheplanof recovery fromtheglobalfinancialcrisis,andtherelatedfinancialsupportfortheunemployed andpoorhouseholds,investingininfrastructureprojects,energy,temporary taxcuts, environmental,socio-economic objectivespromotionofGreenfieldinvestment,labour market flexibility,protection ofemployees, businessdevelopment,enhancing competitiveness,etc.in allthesementionedactivities,specifically notedthatGermanyhasreducedsocialsecurity contributions(which shouldreducelabourcostsandincrease privateconsumption), increased socialspending,public investmentininfrastructure,schools,healthcare,investedinthe automotive industry,encourage privateinvestment,increase loanstoSMEs,etc.(CPU,2009). The latest activities of the European Commission during the 2012 were focused on establishingthe European framework for preventing and resolving (banking) crisis,to taxpayersandtheeconomy inthefuture,protectfromtheeffectsofthebankruptcy ofbanks. Sucha frameworkwouldrepresentthe firstphase of whichisinthe bankingunion.The proposalinvolvesvery closecoordinationbetweenMemberStatesandtoauthorizethe competentauthoritiestoshareholdersmay forcebanksthemselvesbearmostofthelossesif theirbanksintocrisis.Thereasonforthiskindofactivityisthefactthatthefinancialcrisisof2008the yearthatthebigbanksshouldbailoutbecausethey are"toobigtofail",orbecause suchbankscollapsecallsintoquestionthestability oftheentirefinancialsystem,soitis cheaper tosave thanruntheir bankruptcy.The problemisthattherescueof these banksgoing totheexpenseoftaxpayers,andnotattheexpenseoftheirrespective owners.Ontheother hand,thebankingunionwouldbe basedona commonschemeforinsurance of bankdeposits, thecommonEuropeansupervisory body thatwouldhavetheauthoritytomakedecisions regardingsystemically importantandbankswithcross-borderoperations,andthecommon fundfor thefinancingofcontrolled"fire" suchbanksandcoordinated setofinstrumentsand harmonized procedures. The proposalof the EuropeanCommissionhastherefore,a seriesof measuresandactions toaddressthecrisis,andthekey elementsarepreventionandearly intervention.The competentauthoritiesinthememberstatestoresolvethecrisiswouldhavetheauthorityto askthebankstodrawupplansforrecoveryandrestructuringcasestodealwithfinancial 9 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo stress.Competentauthoritieshavetherighttointerveneatanearly stage,beforethecapital levelfallsbelowtherequiredminimumlevel.Thesepowersincludethepossibility ofthe dissolutionof thebank andtheappointmentofaspecialmanagementbefore bankruptcy,the righttoconvenea shareholders'meetingtoadoptimmediate reforms,and requiresthebankto setupincooperationwiththecreditorsrestructuringdrawupaplanfor thedebt.Proposedby theCommission,eachMember Statewillneedtoalsoestablishafund towhichthebanksand investment funds to payfees depending on the riskprofile. Thesefunds would fund controlled"fire" troubledbanks. Eachfundwouldbe responsibleforthebankonitsterritory,whilefor thoseoperatinginmultiplecountriesagreedarrangementsbetweenthecompetentauthorities inthosecountries.Bankswere regularsubscriberstothefunds ayear to1% of the amount of depositsguaranteed bythestate.Itisemphasizedthatthefundscanbeusedonly for restructuringor orderly conductofbankruptcy ofinsolventbanks,andnotforrescueor assistancetobanks,on whatbasiswouldtheythenacquiredoveranunfairadvantageoverthe competition. It is especially important to prevent irresponsible banks use other people's money, based on asoundpremisethat in the eventof aproblem to the aid of thestateto lend. However, theremovalofthese structuralandinstitutionalproblemsatthesystemlevelis notdone allthatisnecessary.Interventionsundertakeninthefinancialsectorthroughthe variousformsoffinancialsupport(additionalliquidity,recapitalization,takingrisky assetsor contaminated),and variousformsofguaranteesandliabilities,eventemporarynationalization of certain financial institutions, have given good results in terms of getting out of the recession, credit growth activities, and some financial institutions have already realized profitsthankstothewrite-offlosses.Inadditiontotheformer,we needanewfinancialand institutionalinterventionsduringrecovery andgrowthbasedonnewcreditandinvestment expansion.Thekey istocreatesystemsolutionsthatwillminimizetheriskofnewcrises.In thissense,itis necessary toimproveregulationin monitoringsustainablefiscalandmonetary policy andprudentialdisableaccesstothesystempressuresasawholethrougha better understandingofrelationshipfinancialandrealsectorsandtheirvulnerability intermsof shocksandeconomic contraction,andthrougha better systemof monitoringandearly warning,improveriskmanagement,developcooperationwithother countries,effectively implementregulatory measuresandquicktoreact,withcaution(whichisneededfortherisk assessment)with theintroduction of financial innovations. Proposals andrecommendationsofsome economists’ possible wayspreventionof financialcrisis Many economistsstilldonotdaretowriteseriousarticleswhichledtoconcreteproposals onpossiblewaystopreventthisfinancialcrisis.However,duetothecomplexity ofthecase studies,itisnecessarytobrieflyinthe sequeltoexposethemostconstructivesuggestionsand recommendationsmosteconomic expertsonthepreventionandcontrol ofthefinancialcrisis in economictheory. Stiglitzproposalprimarily relatedtoreformingandmodernizingtheworld'sfinancial institutions, in terms of greater accountability, transparency and openness to the less developed countries(Stiglitz,(2004), p. 239).Accordingtohisanalysis, Stiglitzbelievesthat fromtheglobalfinancialcrisisandeconomicrecessiononlygetthe2013,butstillsuggests 10 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo thattheworldfinancialarchitectureismorefragiletoday thanbeforethecrisisandthatthe questioniswhenwillithappenagain.Whathasbeendonesofarinthearea ofreformofthe globalfinancialarchitecture isbad,thebankshave takenbillionsof dollarsfromthestateand continuedtodoso.Thisiswhy Stiglitzfor"NewWorld"orthe"newcapitalism".Keepingin mind the currentstate ofthe global economy, theNobellaureate proposesan interesting setof measuresthatshouldbetaken(buttheiruseisassumedtobeglobally changingsociety from theroots):theconstitutionofthebodythathasmostpowersandgreaterrepresentativeness thananybodywhichexiststoday becauseglobalcrisisrequiresaglobalresponse.Existing institutionsareinadequatetothemomentthatthey knewit,andsomehavecontributedtothe crisishappen. Furthermore,itisnotequallyproportionalrepresentationinthevotingstructure oftheinternationalfinancialinstitutions,therefore,needamoredemocraticrepresentation, andtheintroductionofanewglobalreserve systemwithonecurrency, weneedamultilateral systemthatdoesnotdependonthecurrencyofacountry,itisnecessarytoconnectallthecurrencies (modelled on SPV) to create a global currencythat would be permanent. In addition, the global financial reform would involve greater control and supervision of financial markets, reducing incentives forbankers, etc.(Stiglitz, (2004), p. 265). Proposal,whichwasbasedonaradicalreformofkey actorsoftheworldfinancialsystem gavealsoWaldenBello, (Reis,Guilherme,(2004),p.3)aprofessorattheUniversityofthe Philippines. Specifically,Bellobelievesthat theproblemisinthestructureandorganizational cultureoftheworld'sfinancialinstitutions (IMFandWorldBank),andthelackof responsibilityoftheMinistryofFinanceoftheUnitedStatesandalackoftransparency. That'swhyheis proposing the elimination of allstructural adjustment programs in developing countriesandincountriesthatare incrisis,thenreducingthenumberofprofessionalstaffin thesefinancialinstitutionsandreduceoperatingcosts.Themostimportant thinginallthisis thecreationoftheGlobalCommissionontheFutureoftheIMF,inwhichhalfthemembers of the Commissionshouldbe representativesfromnon-governmentalorganizations,because they arecivilsociety organizationsthathaveplayedadecisiveroleinthediscovery of destructive and undesirable effects of theadjustment program. ProposalRobertA.Mundell, (Little,Oliveo,(1999),p.9)aprofessorattheUniversity of Columbia,accordingtowhichintheXXIcenturyshouldfinally gettocreateanewworld financialorder,wasreflectedinthefollowing:the U.S.,JapanandtheEUshouldintroducea commoncurrency (“intor”)anduniquetheglobalfinancialsystem.World'smajorcurrencies the dollar, theyenandthe eurowouldhave afixedexchangerate, one over another. Japan's central bank to implement monetaryreform andthe fixedexchangerate in the ratio 100yen to the dollar, while theECBfixed euroexchangeratein the ratio of one euro to onedollar. Other currenciestopegtheir coursesforone ofthe aforementionedcurrencies,whichisdominantin thefield.FormedwouldbetheCentralBankoftheworld,whowouldworkunderthe currency boardandstrictly tocontrolthatnocountry in"intor”notprintmoneywithout backing.Accordingtohim,thecentralbankoftheworldrepresentedby theIMF,morein termsofcoordinationof thewhole business.Inthiscase,the Board ofGovernors would appointanoperationalbody whichwouldbecomposedofrepresentativesofthecentralbanks of 11 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo the threelargestandmostdevelopedeconomic entitiesintheworld(Japan,U.S.,EU). Speculators,who earnedbillionsof dollars onthe exchangerate differentialsbetweenthe world'scurrencies,woulddefinitely losetheirjobs,andtheriseofglobalGDPwouldbe doubled.Hebelievesthattheeuroopenedtheway "intor".Specifically,theeurowasfirst broughttothefundamentalchangesintheconfigurationoftheworldfinancialsystem,and thebestway tounderstanditscontributiontothenewworldorderwouldbetorealizethe monetary differencesandmovethecapitaltothenewmodelsoftheinternationaleconomy. Because of this great country are viewed as entities that are interconnected different currencies,fixedor flexible exchange rate. Theessence of hisideaswastocreate a global Crosscurrencybalanceandtopresentanewconfigurationoptionsworldcurrencies.Ifall three currency areas Isles stable prices, then among them should rule Cross currency exchange rate stable.Today,Mundellinsisted onthe adoptionof hisproposalinthe circles of therichandhighly developedcountries.Ifhisplantostabilizetheexchangeratebetweenthe threelargestcurrency wasadopted,itwouldallowasufficientincreaseinworldGDP.Onthe other hand,itcouldincrease thechancesof developmentandglobaleconomic stability,which would be expanded, andthe under-developedareas of theworld. RobertZoellick,(Rargavajas,(2009), p.15),WorldBankpresident,saidthatthe consequences of the global financial crisis for years. Zoellick argues that refers to the changingglobaleconomic map,soa strongcontributiontothe growthof the worldeconomy given numerouscountries.Inthisconnection,the statusofthe dollar asreservecurrency, accordingtohimisnolongersafe.Accordingtohim,theglobalcrisishadtolearn topredict. Therefore, it is necessary to create a group of finance ministers who will be able tocomprehend the problems in time. Multilateralism is necessary to develop a clearly constructedasenseofsharedresponsibility forthe sound basisof globalpolitical economy.In addition,itmustbe flexibleandinvolveactorswiththegreatestinterestintheeconomy. G-7 mustbe connectedalsoBrazil,China,India,Mexico,Russia, SaudiArabiaand SouthAfrica, thentheneedtoexpandtheFinancialStability ForumandtheIMF,strengthenfinancial supervision,multilateralnetworktoconnectwiththeenergy andclimatechangenegotiations ofnewmechanismsforthe protectionofforests,developnew technology,to providefinancial assistancetopoor countries, etc. AccordingtoGeraldCélente(“economicNostradamus”)contemporary worldand civilizationswillemergefromthefinancialcrisisonly ifitisabletolaunchnewproduction capacity,whichgofurtherthanthenewtechnologiesfor alternativeenergy.Hisforecastsare fairly concise,butwithoutany concretesolutions:thecollapseoftheglobalfinancialsystem, recessionanddepression,lackofhealthyfood,alcoholism,poverty inthecities,crime pandemic, pandemic diseases, riots, wars, etc. According to him, the economic tragedy Greeceonly the"beginningoftheend"thattheworldexpects.Manyhavecharacterizedthe globalcrisisasacrisisofcapitalismbutCelentethinksisactually thedestructionofhuman nature. Like hispredecessor,PaulKrugman(Krugman, (2012), p. 66)alsobelievesthat itis necessary torestructuretheglobalfinancialsystemandimposestricterregulationsinorderto avoidrepetitionof the financialcrisisof major proportions.However, heexpressedconcern thatthereformmomentumwearsoff, becausethere isnopoliticalwilltodoso.Accordingto 12 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo him,thegovernmentshouldbe more severe,becausefinancialmanagerscontinue to"reap" giganticbonusesandprofits.Becauseoftheslowandpainfulrecoveryfrom theglobal financialcrisis,unemploymentintheU.S.reacheditspeakinearly 2011.Therefore,the government,accordingtohim,shouldhelppeopleretainjobs,basicwages,socialservices andhealthcare, andoneofthewaystoovercomethecrisiscouldbeaglobalplanto encourageinvestmentingreentechnology,andamoreseriousapproachtoclimatechange that could help keep the level of demand. Essentiallysuggestions Krugman go towards liberalizationofinternationaltransactions, the liberalizationofdomestic financial markets, the emphasisonthestabilityofworldpricesofrawmaterials,energy andfoodproducts,and finally establishingfiscaldiscipline.Obviously,thelackoftransparencyisattherootofthe currentfinancialcrisis,andthuslong-termpolicy shouldbefocusedonincreasingthe transparency ofstructuralfinancialproducts.Inconnectionwiththis,inhisopinion,thereare atleasttwomovesthatshouldbe consideredatthe multilaterallevel,including:the role of creditrating agenciesand maturitymismatch in non-banking financial institutions. Thelackofaccuratepredictabilityofthefinancialcrisisineconomichistoryiswhat most intriguing contemporary macroeconomists is.Thus,accordingtoPaulSamuelson anticipated recoveryoftheglobaleconomyuntilthe2014(Samuelson,2009). Analyzingthedeepercausesof thefinancialcrisis,Samuelsonbelievesthata similar situation occurredinthe periodbetweenRoosevelt'sinaugurationinMarch1933 andthe beginningof World WarII. The lifespan of this Nobel Prize winner allowed him to experience the economic cyclemakesafullcircle,andstatedthattheglobaleconomy iscomingback, Keynes,accordingtowhichtaxpolicy anddeficitspendingareconsideredasmajor determinantsinthemanagementofthemarketeconomy.Inthiscontext,akey Samuelson proposalisaimedatrestoringpeople'sconfidence inthe globalfinancialsystem,despite the yearsbeforethefinancialcrisisbuiltupasa"houseofcards"withamoreriskyandtoxicfinancial derivatives. Nuriel Roubini believes that overly optimistic assessment of the current situation regardinghealthoftheAmericaneconomy couldbepremature(Roubini,2008). RoubinisaysthatshouldnotbeexcludedinthefutureanotherverystrongrecessivewaveintheU.S. andglobaleconomy,aftersummarizingtheeffectsofpaststimulusmeasurestaken bythe U.S. government to buttress the rapidly deflating as soon revived the American economyafterthecrisis.Hewas theonlyonewhopredicted thefinancial crisis in the U.S.He stillwarnsthatthe Fedwillbe a greatchallenge,because oftheskillstobe a leadinginterest rate policy,much willdependonthe U.S.,andthe globaleconomy.Roubiniannounces possible"W"recessionandbelievesthatitisnotoverbecause oftheriskassociatedwiththe cessationof(monetary andfiscal)stimulusinmostdevelopedcountries.Accordingtohim, there couldbe uptostag-deflation(recessionanddeflation), ifthe state andthe government increasetaxes,reducespendingandliquidity toreducefiscaldeficits.Inaddition,foodand energy pricesrisemuchfasterthantheyshould,sothisisoneofthereasonsforitsannounced "W"recession. Accordingtothe interpretationofGermaneconomistsMaksOtea(Ote,(2009),p.120) financialcrisesaremainly duetothefollowingreasons:thefinancialsectorisdeveloping faster thanthe realsectortoGDP,inadequateeconomicpoliciesof developedcountries, 13 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo leadingtoincreasingdebtandinflatetherealestatebubbleandotherfinancialderivatives. Thepossiblecollapseoftheworldfinancialsystemwarnedbackin2005andpointsoutthat in2001.Thefinancialorderwasso"sick"thatcouldcollapseatany momentoccurred. Financialcrisiscontainsa"crisisofinformation," because itisassumedthatmultinational corporationsandlargeprivateactorsinthefinancialmarketsmay determinethatthe informationandmanipulatethem(orspeculate),whichisdefinitely notgoodfortheworld economy.Therefore,stockexpertOte offersaprogramof a fewpointsinnoparticular, emphasizesthatinvestmentincertainactionssaferthanrealestate,goldisstillthenumber oneinvestmenttoolforemergenciesandtohumanbehavior(attheoutbreakofany crisisis almostalwaysa criticalfactor) cannotbepredicted withempiricalaccuracy,evenwhen something like the financialcrisisforecastersconstantlytrying. Thus,some importantlessonsfromwell-knowneconomistsinthe internationaleconomy resultingfromacareful studyofthecurrentfinancialcrisis.Learnfromothers' mistakesisnot easy,butitismuchfasterandmoreefficiently bylearningontheirownmistakes.Therefore, the financialcrisis confirm someof their mostimportant recommendations, in order toresolve seriouseconomicproblems,increase thelevelofconfidence andreducethe risks arisingfrom the financial sector. Possible scenarios for a new worldfinancialsystem Thefollowingisabriefoverviewofa few“good"and"bad" scenariosthatcouldhavea majoreffectonglobaleconomicdevelopmentsandtrendsduringthe2013,andthatthey are madeby MorganStanleyanalysts:(1)restoreinflation,(2)therealestatemarketintheU.S. has stagnated.(3)Japan'scentral bankwasbuyingEurobonds inanattemptto devaluetheyen againsttheeuro.(4)Italianpoliticsrevivescycleofcrisis.(5)GreeceremainsintheEU, whileresearchinearly2013suggeststhatthe EUandtheUnitedKingdomcome.(6)UK officially givingupthefightagainstinflation.(7)TherecessionisreturningtoAustralia.(8) Emergingmarketgrowthcontinuesapathofgrowthdrivenby investmentandexports.(9) Shocking Chinese restrictions could cause credit problems that could threaten both the Chinese and global economy.(10)Asiaincreasedexports.(11)Back to the"Soviet Union." Besides,severaleconomicandfinancialgurusarealsorangwithalarmingforecastsfor 2013(NourielRoubini,MarcFaber,Larry Edelson,KyleBassandothers).Notonly doesit provide for thecontinuationof theeconomicandfinancialcrisisaswellasitsexpansioninto the field armed struggle!So Roubiniin May2012announced that the2013crisis hitthe world sharperthanthose from 2008. As “Dr. Ruin” says, therecession in Europecreates theausteritymeasures, thestrong euro,thecreditcrisis in theperipheral countries oftheeuroareaandthe lackof consumer confidence.Inaddition,he saidthatthisyear couldoccur blockade aroundtheworldfinancialsystem.Thiscouldresultinfivefactors:the debtcrisisinEurope, China'seconomyisshaky,theslowdowninemergingmarkets,theriskofrisingoilpricesdue tothe developmentofIran'snuclear programandthe U.S."fiscalgap."Swissinvestor and financialadviserMarcFaberforhisthinkingofthenickname"DoctorDoom." Faberpredicts thattheU.S.governmentbeginsnew warsinresponsetothe economiccrisis.On the other hand,financialanalystLarry Edelsonin2013alsoseewar,andthatpredictionisbasedonthe 14 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo theoryofthecycleofwar,whichtellsaboutthelawsunderwhichcompaniesfallintoastate ofwar.AccordingtoEdelson,war cycletheorysuggests2013asoneinwhichthey could breakor inflamewarsinfluencedeconomic developments.Also,AmericanbusinessmanJim RogerswarnsthatcontinuedfinancialrescueindebtedEuropeancountriescouldprovokea newworldwar,becausewarweaponscouldbeboostedtradewar.EconomicanalystKyle Bassbelievesthatwarsoftenemerge asa resultof the economicdecline.In2013willbe restructuredbillionsofdollarsofdebts,andmillionsofreasonabledepositorswilllosea large percentageof itspurchasing power. TheUNhassetitsforecastfor 2013expressedmildwordsoftheaboveframework. Specifically,theUNpredictsglobaleconomicgrowthrateof2.4%in2013andfrom3.2%in2014. Thisslowgrowthwillnotbenearly enoughtoovercomeunemployment,withwhich many countriesarefacing.Withexistingpoliciesandgrowthtrends,EuropeandtheU.S.will takeatleastfiveyearstomakeupforlostjobscausedbytheGreatRecession2008and2009. BearinginmindtheUNforecasts,belowemphasizethekey elementsofhisreport:(1)Inthe eurozoneeconomy will2013growby only 0.3%,andthe2014by 1.4%,whichwouldbea shortstepforthebettercomparedtoadropof0.5%wasrecordedinthe2012.(2)U.S. predictsmodestgrowthin2013and2014,althoughtherealestatemarketstartedtoshow signsofrecovery.ThustheU.S.GDPin2013shouldgrowby only1.7%,whichis0.4% slower thanthe rate ofgrowthof 2.1% in2012.(3) Therewillbemoretoslowdownthe Japaneseeconomy,whichwillgrowthisyearby0.6%,andthe20140.8%,comparedwith 1.5% lastyear.(4)The economicproblemsof Europe,the USAandJapanwillbe in developingcountriesthroughweakerdemandforexportproducts tothesecountriesand increased instabilityin capitalflows and commodityprices. TheU.S. National IntelligenceCouncil (NIC)issued areport, "Global Trends 2030: AlternativeWorlds,"whichstatesthattheimpactoftheU.S.andtheglobaleconomy inthe coming decades of decline, and will until 2030 China will become the world's largest economy. WithChinawillbecomea neweconomic giantsandIndiaandsomeotherAsian countries.U.S.willnotfadeonly ineconomicterms,butwilldeclineinthecomingyearsand itsimpacton globalpolitics.Inthatsamereportcitesthefollowing"good"scenarios:(1)11 new economic giants:Bangladesh,Egypt,Indonesia,Iran,Mexico,Nigeria, Pakistan, Philippines,SouthKorea,TurkeyandVietnam,shouldbe2030wasabletotakehiseconomic positionof the EU.Incombinationwiththe major economiesofChina andIndia,thesegiants willbe11newcentreofglobalpowerwouldmovefromWestto East,and (2)Theworldwith8.3billionpeople.The world's2030weresupposedtoliveabout8.3billionhumans(as comparedto7.1billionfrom2012).Abouttwo-thirdsoftheworldpopulationby2030will liveincities.Mostofthepopulationwillhave accesstoadvancedtechnology and healthcare, and most countries, led by China and the United States, will develop international cooperation.However,thegrowthoftheworldpopulationwillleadtoconflictsoverwater andfood,especiallyintheMiddleEastandAfrica,andwillleadtoinstability oftheglobal economic collapse.Thereportalsocites8potentialworstcase scenarios,calledas"black swans" globaltrendsfor2030:(1)severe pandemic,(2)morerapidclimatechange,(3)the collapse ofthe EU/euro,(4) orfailure ofthe democratizationof China,(5)(not) thereformed Iran,(6)nuclear war,weapons of mass destruction, cyber-attacks, (7) geomagneticsolarstormcoulddestroy 15 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo satellites,powernetworkandmanysensitiveelectronicdevices,and(8)the disappearanceofAmericanpower.Thesechallengesandrisksarebestillustrated by Figure2. Figure2 Key risksto whichthe worldwillfaceinthe coming decade 21st century ECOLOGICALRISK Climatechange GrowthinCO2 emissions Greatcontamination GEOPOLITICAL RISKS Weapons ofmass Nationalizationofresources Growthofcorruption RISK SOCIAL RISKS Lackofdrinkingwater Foodshortages Pandemics andepidemics Strengtheningnationalhatred ECONOMIC RISK The disintegrationofthe worldfinancial system Chronic fiscalimbalances Unevenfood prices The imbalance ofthe labourmarket TECHNOLOGICAL RISK CyberAttacks Massdisinformation So,thekey challengestheworldwillfaceinthefutureare(un)willingnessoftheU.S. andtheEUtosolveits ownfinancialcrisis,theresolutionoftensions intheAsia-Pacific region,theIraniannuclear programandthewar inSyria.Inaddition,major threatsandrisks are:the dissolutionof the presentworld financialsystem,deepeningthe gapbetweenrichand poor,theextremevolatility inenergyandfoodpricesandthespreadofweaponsofmass destruction. Conclusion Thispaperoutlinesthemostimportantguidelinesinordertominimize thefinancialcrisis, whichsignificantly strengthenedinthefuturestructureoftheglobalfinancial systemand improveitsfunctioning.Asalready statedinthepaper,toagreaterextentinvolvesincreasing thetransparency ofinternationalfinancialrelations,strengtheningthebankingandfinancial system of the national economy and promote greater private sector participation in the financialsystem.Therefore,adirectresponsetotheglobalfinancialcrisis,they wouldmake thefollowingmeasures:providingliquidity support,i.e.withafacilitationofthecentralbank asthe"lenderoflastresort" andareductionofthereserverequirement,expandingfinancial safetynets,interventionsand"injection"ofcapitalinfinancialinstitutions,therestructuring ofglobal financial institutions,measures to start lending. The crisisalsorequires,andstablefinancialsystem,responsiblemonetarypolicy,regulate the financial, especially banking sector, restore confidence in financial institutions and modern financial instruments, as wellasresponsible fiscalpolicy. Significantriskisrelatedto fiscalpolicy (i.e.fiscalsustainability,thesustainabilityofexternaldebt).Intheopinionof mostoftheworld'sexpertsthefinancialindustry crisisofthefinancial sectorwillcontinue until 16 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo the banks do nottighten up their capitalandnot lending to the economysignificantly. References CPU,(2009),Odgovorinaekonomskukrizuisrednjoroćneperspektive razvojauEUI BiH, CPU, Sarajevo. Dornbusch, R., (1999), After Asia: New directions for the international financialsystem., Journal of PolicyModelling, Vol. 21,Issue3, Belgium. Dorn,J.,(2008),Internationalfinancialcrises:Whatroleforgovernment?,CATO Journal, Vol. 23, Issue1, New York. FinancialServicesAuthority,(2009),Aregulatoryresponsetotheglobalbanking crisis, FSA, FinancialServices Authority,London. Financial Stability Forum, (2008), Report of the Financial Stability Forum on Enhancing Market and Institutional Resilience, Financial StabilityForum, Washington D.C. Goodhart, C.A.E.,(2008),Theregulatoryresponsetothefinancialcrisis,CESIFO WPNo.225,Presentedat Cesifoconferenceon«Financialmarketregulationin Europe», Support by the WGL Leibniz association within the project “How to construct Europe”,London. http://www.dni.gov/index.php/about/organization/national-intelligence-council-globaltrendsNationalIntelligenceCouncilGlobalTrends, January2013 http://www.poslovni.hr/svijet-i-regija/pad-financijskog-sustava-najveca-prijetnja226797, May2010 http://eu.commision.org,May2010 IMF, (2009), Lesson of the Global Crisis for Macroeconomic Policy, IMF, Washington D.C. Little,J.S.,Olivei,G.P.(1999),RethinkingtheInternationalMonetarySystem:An New EnglandEconomicReview, Nov/Dec.,London. Overview, Ohmae,K.,(2007),Novaglobalnapozornica:izazoviiprilikeusvijetubezgranica, Zagreb. Mated.o.o., Ote, M., (2009), Slomdolazi, Romanov, Beograd. Pilbeam,K.,(2006),InternationalFinance,ThirdEdition,PalgraveMacmillan,NewYork. 17 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo Rargavajas,S.,(2009),Thefinancialsectorbailouts-sawingtheseedsofthenext crisis,Financialmarkets,institution andinstruments, Vol. 18,Issue 2,New York Reinhart,C,Roggof,K,(2009),Theaftermathoffinancialcrisis,NBERWP14656, Cambridge. Reis,A.,Guilherme,J.,(2004),Internationalfinance:Meetingtheneedsofpeoplein developingcountries, WP/16.,Policy IntegrationDepartment,WorldCommissionon the SocialDimenzion on Globalization International Labour Office, Geneva. Roubini,N.,(2008),TheCurrentU.S.RecessionandtheRisksofSystemicFinancial Crisis,Written TestimonyfortheHouse ofRepresentatives'FinancialServices Committee, Washington D.C Samuelson, P., (May2009), Opasnosttek 2012. Available:[http://www.nin.co.yu/misc/pretraga.php?txtKeyword=%D1%88%D1% 82%D0%B0+%D0%BD%D0%B0%D1] Soros, G., (1998),Krizaglobalnog kapitalizma, Rabic, Sarajevo. Stiglic,J. E., (2004), Protivrečnosti globalizacije, SMB-x, Beograd. Zandi, M., (2010), Financijski šok, Met d.o.o., Zagreb. 18 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 1615 Title A name given to the resource Global and State Policy and Modern Financial Crisis Author Author IBRELJIĆ, Izet NUHANOVIĆ, Amra Abstract A summary of the resource. Lately dominates the impression that most holders of economic policies at the national and global level are not willing to give up his rigorous attitude and follow the recommendations on which there is scientific consensus is evident. However, consistent with considerations of instructions that the economics have been offered, would significantly reduce the frequency of crises and the damage that they bring with them. Until today the variety of conclusions are crystallized. Speaking of preventing financial crisis and its practical implementation in the process of creating the optimal macroeconomic policy is a priori highly desirable. So in the United States adopted a plan that aims to redeem the State risky investment, while the EU has a similar situation, because there are also carried out bank recapitalization. Considering the above, the paper analysed and presented the main activities undertaken on the road to recovery from the effects of the global financial crisis, as well as the latest developments in the global market, with special reference to the Euro zone. Keywords: World Economic Policy, G-20, World Economic Crisis, Answers, Challenges. Publisher An entity responsible for making the resource available International Burch University Date A point or period of time associated with an event in the lifecycle of the resource 2013-05-10 Keywords Keywords. Article PeerReviewed Identifier An unambiguous reference to the resource within a given context ISSN 978-9958-834-23-3 https://omeka.ibu.edu.ba/files/original/4ba12f7fbba889ebbd70917ff26382dc.pdf a00b3414ecf4ca3e1fbadcf64607aff7 PDF Text Text International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo Global Crisis of 2008 and its Effects on an Emerging Economy of Turkey’s Growth Process Bilge Afşar KTO Karatay University, Konya, Turkey bilge.afsar@karatay.edu.tr Birol Büyükdoğan KTO Karatay University, Konya, Turkey Hasan Gedik KTO Karatay University, Konya, Turkey By the year 1980 with a new world order began to take shape more clearly, the crisis started to gain global feature. All economies involved in the global system were forced to play the role given by the new order. In this study, within the framework of this new order, effects of the last global crisis of 2008, and the rising economy in Turkey will be discussed. At the same time the course and speed of the effects of the crisis will be revealed. The basis of the study which is enriched by the statistical studies will be formed by self-effects as well as the taken and applied economic decisions. In the first section, the process after the national crisis that Turkey had experienced since 2001 will be evaluated. It has been identified that Turkey has shown a negative growth from 2002 to 2008. In 2009, Turkey experienced strict contraction and began to recover in 2010. However, experiencing the growth rate of 7.7% until 2009 has emerged as a contradiction since the growth rate was 4.5% even in the 1950s. Today, if this rate is not increased, convergence is inevitable, which is the focal point of the study. Another focal point of the study is, the next 10-year period in Turkey's contribution to production due to the young population will peak of the active population, and will develop a low risk banking system and the goal of being the 10th greatest country by the year 2023. In the case of what can be done to achieve that goal; Interest and inflation will not increase but followed more loosely program than in the past, maintenance of the external source input and the others. 61 �International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo In addition, The SMEs, which are major determinant of the goal of becoming the 10th greatest economy of the world, effects on the economy, their more than 80% value added share in the world, since it is 30% in Turkey will be discussed in the part of the study. At the same time, it is identified that SMEs which have contribution in dealing with the crisis have experienced the following events in the global financial crisis. For example SMEs; Tried to survive by reducing profit margins and increasing their reputation by increasing advertisement expenses. Keywords: Global Crisis, Turkey, Emerging Economy, SME, Expansion 62 � https://omeka.ibu.edu.ba/files/original/fc9ba36e1f09c2bd2eef6b0ba6d54b74.docx a4779490bee2cdc517021ae416c9a991 https://omeka.ibu.edu.ba/files/original/95c5306cf13f890f5920aa4c49e12773.pdf 465b0ce0c7e4d8febae1e4af488d6bba PDF Text Text International Conference on EconomicandSocialStudies (ICESoS’13), 10-11 May, 2013, Sarajevo Global Crisis of 2008 and itsEffects on an EmergingEconomy of Turkey’sGrowthProcess Bilge Afşar KTO Karatay University, Konya, Turkey bilge.afsar@karatay.edu.tr BirolBüyükdoğan KTO Karatay University, Konya, Turkey HasanGedik KTO Karatay University, Konya, Turkey Abstract By the year 1980 with a new world order began to take shape more clearly, the crisis started to gain global feature. All economies involved in the global system were forced to play the role given by the new order. In this study, within the framework of this new order, effects of the last global crisis of 2008, and the rising economy in Turkey will be discussed. At the same time the course and speed of the effects of the crisis will be revealed. The basis of the study which is enriched by the statistical studies will be formed by self effects as well as the taken and applied economic decisions. In the first section, the process after the national crisis that Turkey had experienced since 2001 will be evaluated. It has been identified that Turkey has shown a negative growth from 2002 to 2008. In 2009, Turkey experienced strict contraction and began to recover in 2010. However, experiencing the growth rate of 7.7% until 2009 has emerged as a contradiction since the growth rate was 4.5% even in the 1950s. Today, if this rate is not increased, convergence is inevitable, which is the focal point of the study. Another focal point of the study is, the next 10-year period in Turkey's contribution to production due to the young population will peak of the active population, and will develop a low risk banking system and the goal of being the 10th greatest country by the year 2023. In the case of what can be done to achieve that goal; Interest and inflation will not increase but followed more loosely program than in the past, maintenance of the external source input and the others. Keywords: Global Crisis, Turkey, Emerging Economy, Expansion, Economics Introduction Turkey economy, particularly after 1980, as a result of both internal and external dynamics, experiences numerous crises. These crises experienced made the growth, qualified as increase in production capacity, unstable. This instability negatively affected the national income per capita. When these crises of interest are combined with political and economic negative developments, it is observed that the serious falls in growth rate. With 2001 National Crisis is overcome, in the process ranging to 2008 Global Crisis, growth rate actualized over 5s%. The realizations in growth directly affect the other areas of economy. The aim of this study is to discuss the effects of 2008 Global Crisis, one of crises affecting Turkey, on growth process of Turkey. 101 �International Conference on EconomicandSocialStudies (ICESoS’13), 10-11 May, 2013, Sarajevo The Concepts Economic Growth and Crisis Growth, one of the oldest targets of societies (Soule and Antell, 2001: 327 ) and expressed as increase in income, is measured by the increases in real Gross Domestic Product (GDP) (Parasız, 2003: 10). Also, in order to be able the vicious circle of poverty, it was considered as a necessary condition (Yılmaz and Akıncı, 2012). Growth is analyzed via variations occurring from year to year. But, it is not reasonable to assess the increase or decrease in growth with the figures of only one year. For example, positive growth expresses the continuous and permanent increase in income level, not an increase for one time (Ülgener, 1980: 408-412). Together with increase of crises, the fruit of capitalism i.e. the disruptions in economic balance (Eğilmez, 2012: 167), growth was begun to be scrutinized not only quantitatively but also qualitatively. Thus, provided that the increase in growth rose the income per capita, it was begun to be emphasized that it was reflected on the individual as development and welfare. The welfare and development of the individual comes to our face as final aim of growth. But, the crises interrupting the ordinary course damage to this final aim. Togetherness of crisis and growth presents the answer of the question “Why is growth desired in economic meaning?” more clearly so that growth targets on the society and its development. The desired growth is the one that gives a chance to save to the individual and society about future, distributes the increase in welfare justly, encourage the human development making a contribution to the society, and realize it (Berber, 2004: 6 ). Provided that the growth enabled all of these, the dimension of development and welfare is proceeded. What already implied with economic growth is the growth free from price increases i.e. real growth (Eğilmez, 2012: 38). 2008 Global Crisis And Growth Process of Turkey That Is Economy An Emerging In the second half of the year 2008, the essence of crisis reaching global dimension is the problems experienced in mortgage market in US (SusamveBakkal, 2008:73). Turkey entering a serious recession period with crisis caught the stability via the fiscal and monetary policies applied . But this stability was badly affected from the global crisis unavoidably. This exposure made itself evident in especially in growth rate so that, together with crisis, slowing occurred in the growth rates of both the developed and developing countries, not only of Turkey. while the growth rate of world economy was 5% in 2007, it fell to 3s% in 2009 (Susam and Bakkal, 2008: 77 ). While Turkey recorded a growth of 1.1% in average between 1997 and 2001, this average became 7.2% in average between 2002 – 2006 (Kesici, 2010: 12 ). Together with this crisis, not only in Turkey but also all over the world, the values of national income, employment, credit, and foreign trade experienced the greatest fall after 2 nd World War (AydoğuĢ, 2009: 31 ). In Turkey economy, The growth that fell together with crisis was followed by the regression in foreign trade and increase in budgetary deficit. In response to these negativities, current deficit fell and interests regressed. The financial sector damaging in the national crisis in 2001, with loosening the monetary and fiscal policies and going to interest reduction (Eğilmez and Kumcu, 2011: 362), reached the position of finding the real sector to be able to give credit. But, in the last crisis, real sector was also damaged, so that as experienced in the year 2008, the most important characteristic of economic system entering crisis and the symptom of crisis 102 �International Conference on EconomicandSocialStudies (ICESoS’13), 10-11 May, 2013, Sarajevo became mistrust prevailing in markets (User, 2009: 1). This also made itself evident seriously in real sector. The most important distinction of this crisis in terms of Turkey economy is that chronic inflation was not experienced , when crisis set out and while it was continuing (Akat, 2009: 21). Turkey entered the last crisis more strongly. The other point is also that low inflation, low interest, and floating exchange rate is simultaneously under consideration in economy. So, for the savers providing return with high interest, the new and different period started (Akat, 2009: 27). According to Çolak (2009), the recent global crisis collapsed supply oriented economic policies becoming popular after 1990 and ended the institutional structuring formed with these policies.That is government began to be effective again in economy. Table 1: National Income Figures / Turkey (2000-2012) Quarter GDP in Development current price Rate (%) (Million TL) GDP with Development constant price Rate (%) (Million TL) 1 2 3 4 Annualy 1 2 3 4 Annualy 289.905 317.392 351.173 339.243 1.297.713 326.880 346.340 376.419 364.177 1.416.817 26.383 28.083 31.177 29.533 115.174 27.257 28.895 31.667 29.935 117.753 12,4 9,3 8,7 5,3 8,8 3,3 2,9 1,6 1,4 2,2 2000 166.658 59,3 72.436 2001 240.224 44,1 68.309 2002 350.476 45,9 72.519 2003 454.780 29,8 76.338 2004 559.033 22,9 83.485 2005 Annualy 648.931 16,1 90.499 2006 758.390 16,9 96.738 2007 843.178 11,2 101.254 2008 950.534 12,7 101.921 2009 952.558 0,2 97.003 2010 1.098.799 15,4 115.174 Source: www.tuik.gov.tr/PreHaberBultenleri.do?id=13471 6,8 -5,7 6,2 5,3 9,4 8,4 6,9 4,7 0,7 -4,8 9,2 Year 2011 2012 20,3 19,3 18,6 14,7 18,1 12,8 10,1 7,2 7,4 9,2 103 �International Conference on EconomicandSocialStudies (ICESoS’13), 10-11 May, 2013, Sarajevo With current prices With (constant prices (1998) Populatio Develop Developme Developmen n in the ment Per Capita nt t Year middle of Year Rate Rate rate year '000 TL % $ % TL % 1998 62 464 1 124 4 338 1998 1 124 1999 63 364 1 651 46,9 3 907 -9,9 1999 1 071 -4,7 2000 64 252 2 594 57,1 4 130 5,7 2000 1 127 5,3 2001 65 133 3 688 42,2 3 021 -26,9 2001 1 049 -7,0 2002 66 008 5 310 44,0 3 492 15,6 2002 1 099 4,8 2003 66 873 6 801 28,1 4 559 30,6 2003 1 142 3,9 2004 67 723 8 255 21,4 5 764 26,4 2004 1 233 8,0 2005 68 566 9 464 14,7 7 022 21,8 2005 1 320 7,1 2006 69 395 10 929 15,5 7 586 8,0 2006 1 394 5,6 2007 70 215 12 009 9,9 9 240 21,8 2007 1 442 3,4 2008 71 095 13 370 11,3 10 438 13,0 2008 1 434 -0,6 2009 72 050 13.221 -1,1 8 559 -18,0 2009 1 346 -6,1 2010 73 003 15.051 13,8 10 022 17,1 2010 1 450 7,7 2011 73 950 17 549 16,6 10 466 4,4 2011 1 557 7,4 2012 74 855 18 927 7,9 10 504 0,4 2012 1 573 1,0 Source: www.tuik.gov.tr Note: Population estimations are based on 2008 Address Based Population Registration Turkey economy entered 2011 with a growth over that is predicted. In the first quarter of the year 2011, GDP grew 12.4%. With this growth rate, Turkey economy became one of the fastest growing economies of the world. Also in EU, Turkey that is the fastest growing country maintained this title of it with the growth rate of 8.2% actualizing over the expectation in the third quarter . Turkey economy, with its growth of 8.2% in third quarter, took place in the first rank among European and OECD countries, and in world ranking, in the second rank as a county having the most increase rate of GDP, following China. Turkey economy, with the effect of delayed internal demand in the crisis period as well, experienced a strong and internal demand induced growth process in the leadership of private sector in the years 2010 2011. In 2010, together with the expectation becoming better in the market, middle termed polices and the trust to the political stability and fast input of capital, and strongly financed investments provided economy to grow rapidly. Turkey economy, despite the controlled slowing beginning in the second half of 2011, rose up the pre-crisis level by 14.1%. The Turkey economy growing 8.8 % in average in 2011, with this performance of it, took places among the fastest growing countries in the world. In this period, the increase in the consumption and investment expenditures of private sector became the driving force of especially internal demand induced stimulation and significantly affected the growth. In this process, current deficit reached the highest levels and distinction in the internal and external demand from the aspect of expenditure became very remarkable. The most important contribution to the growth of 8.5% in 2011 came from the internal demand with 10.2 points. Since the saving levels is low, this growth, mostly financed with external 104 �International Conference on EconomicandSocialStudies (ICESoS’13), 10-11 May, 2013, Sarajevo resources, caused the rate of current deficit to GDP to rise to %10. This situation leaded to some concerns about the sustainability of economic growth. In the first half of 2011, while Turkey economy was growing based on internal demand, the external demand negatively affected the growth. This situation varied along with the second half of the year. With the effect of the measures taken to cool down the economy, while rebalancing process was begun in internal and external demand, the contribution of external demand to the growth gradually took a positive appearance. Turkey economy beginning to slow in a balanced way, beginning from the second half of 2011, orientated the path of soft landing, where one was in. This process we called as soft landing is to balance the composition of growth between internal and external demand and thus this is normalization of growth. Table 3: Basic Indicators on World Economy (%) World Growth World Trade Volume 2008 2,8 3,0 2009 -0,6 -10,7 2010 5,1 12,6 2011 3,8 5,8 2012* 3,3 3,2 2013* 3,6 4,5 Source: IMF, World Economic Outlook Report, October 2012 Also in the 2012, the negative effects of global crisis on world economy continued, despite the measures taken bad the tendency of slowing in country economies was maintained. Although 5 years passed from global crisis to now, especially the developed countries and Euro egion, many countries could not still solve their basic macroeconomic and financial problems. Emerging countries, also including Turkey, often depend on the capital coming from the developed countries and this dependency can be viewed as a suicide agreement, when the things get worse i.e. in the periods of crisis (Roubini, 2012: 139 ). As a matter of fact, the effect of the last crisis was felt on the real sector of Turkey and caused the real sector to become smaller (Çoban, 2012: 167). At the end of 2008, after worldwide crisis becoming deeper with the bankrupt of Lehman Brothers, world economy showed a strong improvement, but lost an acceleration again beginning from the second half of 2011. Conclusion Also before 2011, Turkey that could not catch a stable growth trend, along with 2008 Global Crisis, experienced a fall in its growth rate from time to time. The high growth experienced in the first quarter of 2008 was mostly resulted from the increase in internal demand. Beginning from the second quarter of 2008, the fall in growth rate began in the growth ratezs and in respect with third quarter, the effects of international crisis were thoroughly begun to be felt. Depending on becoming of crisis deeper, the growth rate continued to fall. In addition: 1. The last crisis is viewed as the mother of all monetary crises 2. Political stability, structural reforms, and macroeconomic stability make positive contribution to the growth rates. 3. Diplomacy and economic activities going toward from multi - polarity to single polarity affected every kind of institutes and thee rules, supposed not be changed, began to change. While the power balances was reestablished, acquiring maximum share will be the best result. What appears from here is that Federal Reserve Bank did not intervene and raise the interests in American economy growing and experiencing energy outbreak in the years 105 �International Conference on EconomicandSocialStudies (ICESoS’13), 10-11 May, 2013, Sarajevo before the last crisis, even if on the purpose of preventing inflation in American economy. As a result of all of these, the depression economy returned. 4. Crisis affected all areas in the world. Along with the global crisis experienced some paradigms determining the world and Turkey economy collapsed. This collapse is also the predictor of new formation after crisis. For example, China economy is expected to reach a growth of $ 30 trillion in 2040. When considering the effect of China, it will not be wrong to say that new economic order will pass to labor intensive system again.The labor– intensive strategy here implies brain power, not the muscle force. That is, the essence of creating economic value any longer became knowledge 5. At the point, where global crisis turned into global crisis, and deeply affected the real sector, crisis became a debt crisis. At the moment, EU countries are experiencing the best example of this situation . While Europe is experiencing crisis, that Asian countries are growing gives an opinion to us about the new system and new world. Economic dynamic is rapidly shifting toward Asia. References AKAT, A, S, (2009). “YeniDönemiAnlamak”, TekstilĠĢverenDergisi, Vol: 348, Page: 26-28, Ġstanbul. AYDOĞUġ, O, (2009). “2008-2009 (?) KüreselKrizdenGeçerkenTürkiyeEkonomisi ÜzerineBazıGözlemveDeğerlendirmeler”, TürkAkademi, Vol: 4 (ÖzelSayı II), Page: 2749, Ġstanbul. BERBER, M, (2004). İktisadiBüyümeveKalkınma, DeryaKitabevi, 2.Baskı, Trabzon. ÇOBAN,Y, (2012). TürkiyeEkonomisi, ĠkinciSayfaYayınları, Ġstanbul. ÇOLAK, Ö, F, (2009). “2008 Krizinin 1929 KriziileBenzerlikleriÜzerineBirAnaliz”, TĠSK Akademi, Vol: 4 (ÖzelSayı II), Page: 51-69, Ġstanbul. EĞĠLMEZ, M, (2012). KolayEkonomi, RemziKitabevi, 2. Baskı, Ġstanbul. EĞĠLMEZ, M, KUMCU, E, (2011). EkonomiPolitikası-TeoriveTürkiyeUygulaması, RemziKitabevi, 11. Baskı, Ġstanbul. KESĠCĠ, M, (2010). “TürkiyeEkonomisininYüksekBüyümeEvresindeĠstihdamve ĠĢsizlik”, ĠĢ, GüçEndüstriĠliĢkileriveĠnsanKaynaklarıDergisi, Vol: 12, Num:3, Page:7-26, ISSN: 1303-2860, Temmuz, Ġstanbul. PARASIZ, Ġ, (2003).EkonomikBüyümeTeorileri-DinamikMakroEkonomiyeGeçiş, EzgiKitabeviYayınları, 2. Baskı, Bursa. ROUBINI, N, (2012). KrizEkonomisi-DünyaEkonomisininÇöküşüveGeleceği, Çev: IĢılTezcan, Pegasus Yayınları, Ġstanbul. 106 �International Conference on EconomicandSocialStudies (ICESoS’13), 10-11 May, 2013, Sarajevo SOULE, G, ANTELL, G, (2001). HerkesiçinEkonomi, Çev: NejatMuallimoğlu, Avcıol Basım, 4.Baskı, Ġstanbul. SUSAM, N, BAKKAL, U, (2008).“KrizSüreciMakroDeğiĢkenlerive 2009 Bütçe BüyüklükleriniNasılEtkileyecek?”,MaliyeDergisi, Vol:155, Page: 72-88, Temmuz-Aralık, Ġstanbul. User, Erol (2009).EtikEkonomi (1. Baskı), CiniusYayınları, Ġstanbul. ÜLGENER, S, (1980). MilliGelir, İstihdamveİktisadiBüyüme, Der Yayınevi, 6. Baskı, Ġstanbul. YILMAZ, Ö, AKINCI, M, (2012). İktisadiBüyümeveMakroekonomikBelirleyicileri, Nobel Yayınları, Ankara. www.imf.org, World Economic Outlook Report, October 2012 www.tuik.gov.tr/PreHaberBultenleri.do?id=13471 107 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 1493 Title A name given to the resource Global Crisis of 2008 and its Effects on an Emerging Economy of Turkey’s Growth Process Author Author AFSAR, Bilge BUYUKDOGAN, Birol GEDIK, Hasan Abstract A summary of the resource. By the year 1980 with a new world order began to take shape more clearly, the crisis started to gain global feature. All economies involved in the global system were forced to play the role given by the new order. In this study, within the framework of this new order, effects of the last global crisis of 2008, and the rising economy in Turkey will be discussed. At the same time the course and speed of the effects of the crisis will be revealed. The basis of the study which is enriched by the statistical studies will be formed by self-effects as well as the taken and applied economic decisions. In the first section, the process after the national crisis that Turkey had experienced since 2001 will be evaluated. It has been identified that Turkey has shown a negative growth from 2002 to 2008. In 2009, Turkey experienced strict contraction and began to recover in 2010. However, experiencing the growth rate of 7.7% until 2009 has emerged as a contradiction since the growth rate was 4.5% even in the 1950s. Today, if this rate is not increased, convergence is inevitable, which is the focal point of the study. Another focal point of the study is, the next 10-year period in Turkey's contribution to production due to the young population will peak of the active population, and will develop a low risk banking system and the goal of being the 10th greatest country by the year 2023. In the case of what can be done to achieve that goal; Interest and inflation will not increase but followed more loosely program than in the past, maintenance of the external source input and the others. In addition, The SMEs, which are major determinant of the goal of becoming the 10th greatest economy of the world, effects on the economy, their more than 80% value added share in the world, since it is 30% in Turkey will be discussed in the part of the study. At the same time, it is identified that SMEs which have contribution in dealing with the crisis have experienced the following events in the global financial crisis. For example SMEs; Tried to survive by reducing profit margins and increasing their reputation by increasing advertisement expenses. Keywords: Global Crisis, Turkey, Emerging Economy, SME, Expansion Publisher An entity responsible for making the resource available International Burch University Date A point or period of time associated with an event in the lifecycle of the resource 2013-05-10 Keywords Keywords. Article PeerReviewed Identifier An unambiguous reference to the resource within a given context ISSN 978-9958-834-23-3 https://omeka.ibu.edu.ba/files/original/bf747f13a79dcf657d81abb3609bbb8b.pdf ccd3e67783f49cb9edf01b154dec15d0 PDF Text Text 1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo Global Crisis: Consequences and Solution Possibilities Arif YAVUZ Istanbul University, Faculty of Economics, Turkey dr.arif @ turk.net Abstract: In this paper, the reasons and solutions of the 2008 global economic crisis are discussed. In the first part, a comparision of 2008 global crisis with 1929 economic crisis, the effects of each and also the differences are explained. The champions and the losers of the current crisis are interpretted. Also, the estimated duration and the expected end time of the crisis are discussed. In the second part, the effects of the crisis to the Global Economy and to some of the countries are stated. The expected effects can be summarised as, “losing of confidence in global market”, “having negative prospects”, “decreasing of the foreign trade”, “shrinking of the national incomes” ,“shrinking of demand and consumption”, “increasing of unemployment”. In the last part, some solutions for negative effects of global crisis are offered. A world economic story is stated and suggested a new International Money Currency. Restrictions for the virtual Money is recommended and also some new rules on international trade and international finance system are offered. Keywords: global economic crisis, effects of 2008 global crisis, 2008 global crisis, solutions of 2008 crisis Definition and Reasons for The Global Crisis This conference paper has three parts: how does global crisis arise and what conditions do it develop until today. Second, it will be discussed consequences of global crisis. Lastly, solution possibilities will be offered for global crisis. 1 –Is the 2008 Crisis, a global or local one? To understand how global crisis arises, first, we should comprehend is the crisis global or local? In light of information in the last 3-4 months it is possible to say that the crisis we are living is a global one. This crisis is diffferent then that of the 2001 and 1994 Turkish, 1996 Asian and 2000 Latin American crisis. These crisis were regional. The crisis we live in today is global, that is it affects the whole world. 2– A comparison of the 2008 and 1929 world crisis If we think about the 1929 crisis, it was the first world wide crisis. The crisis of today, unfortunately, could be considered a second world crisis. Since 200-300 hundred years ago or in the 1700’s, society was agricultural, and there was no possibility of the creation of global crisis. Because what we know today as being factory production and means of transportation did not exist then. Society solely existed on the sustinance of their agricultural means. However, by the end of the 1700’s and the beginning of the 1800’s with the introduction of the industrial era, with the invention of the Steam machine by James Watt, there arose a drastic structural change in society. Society began to evolve from agricultural to industrial. At the same time, economic points of view were also beginning to move to a more Classical economic perspective. In a liberal economy Classical economists advised that “people should be, and people should pass”. This was based on the famous idea of the invisible hand. Or that economy, inevitably, has the mechanisms to adjust itself, and that any type of intervention would ultimately destroy this mechanisms function. As a result the commencement of mass production and the industrial revolution lead to the typic standard of factories producing as much product as possible because the same economists thought that “every supply created its own demand”. This development and thought came from England. In turn, this idea also passed to Europe and America. However, this theory did not develop as Classic Economists had desired. Due to mass production in factories a substantial amount of stock piled up and as a result many factories were forced into bankruptcy. This was the main reason for the 1929 crisis. In short, the 1929 crisis was industry based, the cause of mass production and insufficient demand. In this period the crisis caused in the industrial sector resulted in a crisis in the financial sector. Bankrupt factory shares had lost their value in the stock exchange. The reason for this was the parallel processing of an industrial and a financial deficit. The profit from 251 �1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo production made during the Industrial deficit was used to pay for for the principal and interest in the of loans in the financial system. There was a break down of economic claims in the frame of the 1929 crisis’s general economic offers and claims regulations. There needed to a balance in supply and demand. The drastic and sudden imbalance of this system was the cause of the crisis. In order to understand the type of crisis we are in today we need to understand the structure of our society. Although today, many countries are recognized as being industrial, America and Europe are no longer considered as such but are refered to as technological societies. Since America and Europe are the culprits of today’s crisis we need to further explore their infrastructures. America and Europe have completed an industrial period and as a post industrial society have progressed to an information or technological population. As a result America’s financial crisis has influenced related societies. Therefore, information regarding America’s financial market directly influences the markets of countries like England and France. Thus, the crisis of today is not an industrial but a financial crisis. This crisis, using the fundamentals of finance, still maintains the imbalance of supply and demand. Because money as a fundamental by-product of finance has caused the instability of this supply and demand relationship. More specifically either there has been a high or low demand of money. There has been contradictory points of view on this topic. Some experts in this area claim that the crisis is caused by the abundance of money while others claim it is a result of a scarcity of money. According to our opinion this crisis has been the result of the abandunce of monetary funds. 3 – Has the 1929 Crisis been more influential than the one of 2008? When compared to the 1929 crisis, it could be said that the one of today is significantly more influential because globalization is much more wide spread. The ending of the 1929 crisis, took approximately 4-5 years. The crisis of today, because it is so major and wide spread, will be much more influential than the one of 1929. 4 – Causes of the 2008 Crisis The crisis of today is caused by the wealth of money. Thus a wealth of money does not necessarily translate into a wealth of physical money but a great quantity of virtual money. 4.1- A Story of a World Economy This topic could be further explored in the form of an exemplary story: lets imagine that ten people live on a planet. These ten people each offer a service or product. On of them labours in agriculture or grows and sells fruit and vegetables. The second person labours in the production of raising animals for the sale of milk, meat and cheese. Another is responsible for the production of textiles. Yet another produces vehicles and another for the construction and sale of homes and buildings. In short, all, except the tenth person, is responsible for the production of some goods or service. The tenth person produces nothing. This person has a machine, and when he presses buttons on this machine he produces a product stamped on paper used for exchange purposes. When he gives this paper to the car maker he gets a car. When he gives some of this paper to the agriculturist or the grower of fruit and vegetables, he gets produce. These nine people with the paper they have recieved use it amongst themselves to exchange their products. This story could directly relate to the situation of today. This story is called “Ekmel Theory”. The pressing of money must be based on some regulation as it was before. However, in 1971 with the abolish of the Bretton- Woods system everything had changed. 4.2- The 1944 Bretton Woods System In 1944, there was a small town in the US named Bretton Woods. An international money system was accepted there. According to this system the US was pressed money depending on the US gold reserves. In this system, 1 ounce of gold was equal to $35 or 1 US dollar was equal to 0,88867 grams of gold. International trade was handled by the US dollar that was pressed depending on gold reserves of the US. If there was demand on gold the US would provide it. This system was active in 1944, however, in 1971 was abolished. Today, there is no requirement for the US to press money depending on gold reserves. The system was basically abolished because of the dependance on gold reserves and press money was blocking the development of world economies and international trade. Thus, this rule was cancelled. Any country could press any amount money, however, international trade did not have the same acceptability or values. Today, there are two accepted money currencies: the Euro and the American Dollar. Other country currencies are not valid in purchasing goods or services in international trade (Seyidoğlu, 2003). 252 �1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo 4.3- Industrial or Financial, an Abundance or Shortage of Money? Our global crisis is a financial wealth of money crisis. There exists groups who control or own the world financial market. These groups are wide spread in America and Europe and could be called the proprietors of globalization. The proprietors of globalization, although in reality consisting of many groups, could be categorized into two factual groups. The proprietors of globalziation played with all their worldly assets and then exerted these valued assets beyond all highest expectation. 4.4- All assets were played with as if in the stock exchange and within 5-6 years their values increased 2-6 Fold Since Stock shares represent the value of a company, a company must increase its “real” value. Although sometimes the increase in value of stocks is not dependant on “real” gains. This type of increase is a speculative one. A company, for example, with a realistic growth of 10% to 30% could hold stocks that represent the company may have increased in value five fold. The same type of specualtions have been made in stocks of petroleum, iron, and copper. For example, a barrel of petroleum within 5-6 years (2003-2008) has increased from 25 US$ to 150 US$ (Đncekara, 2009). In the same time a ton of iron has increased from 300 US$ to 1500 US$. A ton of copper has increased from 25 US$ to 150 US$ (Tuduk, 2008). In the same manner real estate property value in the US has risen from 8 trillion US$ to 20 trillion US$ (Tarhan,2008). If these prices had risen in terms of an inflation it should only increase 30-40% because in European countries inflation rates could be 2-4%, in America 3-4% and other developed countries are observed at a steady 5%. Within 5-6 years of this type of inflation a 30% increase would be the possible outcome. In light of this information petroleum, copper and iron or real estate do not reflect true gains. However, these abnormal gains were not problematic in those days. 4.5- Instruments of derivatives: Two to the third = 2 x 2 x 2 = 8 Two to the fifth = 2 x 2 x 2 x 2 x 2 = 32 The aforementioned abnormal increase rates has not been with actual currencies but with virtual money. As a result, these gains have been a devlopment based on derivative instruments. As known the derivative instrument is a financial instrument that does not increase money volume arithmetically but geometrically. This instrument frequently used in America has commenced and caused the wide spread global financial crisis because these instruments (generally used in corporate equity and mortgage based documents)are sold and bought in the global financial pool. These instruments have been observed in the large financial market transactions of investment corporations, hedge funds, and retirement funds. However, the development of the basis of the instrument, or real value, has been observed to be significantly different than the instrument itself. For example, a home built with a mortgage of 100,000 US$ has lost its relationship with the application of the instrument, the paperwork that represents the 100,000 US$ home has risen to 300,000 US$ with the buy and sell procedures within the financial sector. International accreditors like Fitch, Moodies, and S&P exist to evaluate the aforementioned procedures within markets and their pools. These accreditor firms have noted investments with AA and AAA scores. This way, investments have been known to increase. Also, insurance companies like AIG have been known to insure these investments and instruments. This way the return of money is also insured. Another important issue is the lack of audit or inspection. As a result the crisis of today has arised within the loss of real instrumental value and the existence of accreditor and insurance companies. 4.6 - The Glass-Steagall Act of 1933 The Glass-Steagall Act was enacted in 1933 USA. With the act came the prohibition of bank transactions within the stock exchange and the use of derivative instruments. However, it’s interesting that this act was dismissed in 1999 and banks were permitted to transact within the stock exchange and were allowed to issue derivative instruments (Yıldıray, 2009) . The crisis of today commenced with the Lehmann Brothers’ September 2007 claim to bankruptcy. The announcement of the Lehmann Brothers’ bankruptcy, exclaimed exageration, and was the symbol of a company that went through and failed in an unreal market. After the Lehmann Brothers many investment companies,insurance companies and corporation giants like GM were left in difficult situations. For example, in a short time, the value of GM went down from 20 billion US dolars to just 1,8 billion US (Anatolia Agency, 2008). 253 �1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo For this reason, the crisis of today, is not just a mortgage or investment crisis, but in general a financial crisis that is affecting the globe. For example, the Foreign Minister of Quwait, in the recent past, has claimed the loss of 2.5 trillion US dolars in Gulf countries (i.e. Quwait, Dubai, and Katar) exemplifying the magnitude of the dimensions and spread of the crisis. 5 – Champions and Losers of the Crisis (4 Groups) Another valuable question, whether or not this crisis arose on its own or if it was knowledgably controlled? And who are the champions or losers in this crisis? There are three possibilities. The first, is if the crisis has arisen on its own in an uncontrolled environment? Then the global market has lost as a whole. The second, the crisis was under control and one of the aforementioned markets won and the other lost, respectively. The third possibility is that the crisis was controlled and both markets prospered. In this crisis the winners and losers could go into two groups. The first champions are the ones who franchised the money press because with the fall of the financial markets came the weakness of the real sector, the industrial and service sector and other real assests. For example, petroleum at a rate of 150 US$ quickly falling to 40 US$ stands at a currency rate of 55 US$. At the same rate, a Turkish home valued at 500,000 TL has fallen to 250,000 TL. For this reason, those who own a money press could benefit from worldly assets, and can take advantage of offers when costs go down. The second group of winners are those who own a vault and a desk or those who still use cash. All asset prices fall and when the once valued 20 billion US GM falls to 1,8 billion US, it becomes possible to own. The first of the losers are factory, corporation, and holding owners. Their losses are in proportion to their business. In other words, big corporation owners’ losses are greater than those of smaller corporations. For example, Forbis’s World’s richest people list consisting of Husnu Ozyegin, a rich Turkish Businessman, was no coincident. Because right before the crisis he was the owner of Finans Bank. Just before the crisis he sold it for 2.7 million US dolars and while he held the money, fresh in his hands, the crisis began. The second group of losers are those who hold investments. Those who hold shares in American government, corporation or investment bank stocks would be considered disadvantaged since it is unknown what or whether or not they will pay or get paid. 6 – What is the duration of the Crisis? Has it hit rock bottom ? How long the crisis will last and when it will hit rock bottom are important questions to ask. It will end eventually. When it has hit rock bottom it could bounce back in three ways. Either in a V- shape, a U- shape or a W- shape with the later two possibilities it could end for good. Three possibilities are in question. The first option, if the two global market actors have won and they are in gain (have profit), the crisis will last 1-2 years, hit rock bottom in 2009 and bounce back in a V-shape. The second possibility, if the two global market actors, one winning and the other losing, the crisis will last 3-4 years hitting rock bottom in 2009-2010 and will come back in a U-shape. The third option, is if the global market actors are both in the red then the crisis could last 510 years hit rock bottom in 2015 return in a W-shape and possibly cause war. The world by the end of 2007 and in Turkey since October of 2008 has recorded global economic information on a a daily basis. With this information we have composed a global crisis journal. If we were to look at this journal we would see that upto mid April of 2009 we have recieved only negative news reports. However, with the bad news upto mid April we have recieved few but good reports after this date. In our opinion, not only in Turkey but in the world the crisis has not ended but has come closer. The bottom of the well and the end of the tunnel are visible. With positive good news, alongside the wide spread (bad) news like the bankruptcy of corporations, joining of corporations, and the sale of corporations, we will hit the bottom of the crisis. 254 �1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo Shape V 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 Figure 1: Shape V Shape U 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2006 2007 2008 2009 2010 2011 2012 Figure 2: Shape U 255 �1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo Shape W 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Figure 3: Shape W Consequences of the Crisis 1- Security Problems in the Market The first consequence of the crisis is the issue of security and trust. With the initiation of the crisis the entire world suffers from a lack of trust and security. At the moment individuals have a difficult time trusting each other. For example, banks have no trust corporations they do not give out loans. In the same frame no one relies on checks. People do not trust each other. As a result trust in global terms is at a loss. 2- Negative expectations The second consequence of the crisis is the negative affect on expectations. Individuals choice to not consume products has a negative effect on the economy. As a result prices of goods have gone down. Moreover, it may be said that we could be faced with a deflation. 3 – Consequences around the globe The third consequence could arise among countries. Developed countires are foreseen to be more influenced in comparison to developing or non-developed countries. For example, the US, the UK, France, and Germany, will be the most influenced countries while Turkey is seen as a country that will be less affected by the crisis. Thus, Nigeria, Sudan and similar countries will be less influenced. The reason behind this is that their integration in the world economy is less, compared to the others. The fourth consequence of the crisis is in countries where export is more than imported products which would have a negative effect on the economy. Countries where export is greater than import will suffer with the weakening of global trade. For example, countries like Japan, China, and Germany. The most disadvantaged are especially Japan and China where their economies are dependant on export. Another effect of the crisis is in regard to global national profit of 60 trillion US$ has decreased to 30-40 trillion US$. 4 – Effects on Turkey Because this global financial crisis has its roots in America and Europe the arise of the crisis in our country should not be the fault of the governement. The responsibility of our government takes place after the fact. In other words, the government has the responsibility to take care while in crisis. As a result, our government is not at blame for the crisis however, if the crisis has had negative effects the government should be questioned. If there are consequences and negative outcomes as a result of the crisis then the government should be held responsible and could it could be said that they were not capable of directing the country. This crisis is considered to be a world financial crisis. When global financial sectors crash, banks and then industrial sectors begin to go bankrupt. This situation did in not take place in Turkey but has taken on an 256 �1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo interesting twist. In Turkey no bank goes bankrupt, but in 2008 every bank has made a profit and to say that that there is a financial crisis would be false. However, there is an industrial and real sector crisis. In comparison to the world crisis, Turkey’s prosperous financial sector demonstrates an awkward turn of events in the industrial and real sectors. The reason for this is financial cuts and the existence of foreign banks not giving loans. As a result the prime minister stated that the crisis would be mild over the country and not allow it to break down, but the crisis has more than skimmed over the industrial sector. The difference between the world crisis and the one in Turkey is based on the holding of funds from the financial to the industrial and business sectors. However, because the industrial sector has lost profit and unemployment has gone up the financial sector will soon negatively be affected as well. The low flexibility of essential products such as bread and rice will not be much affected by the crisis. However, sectors that produce furniture, computers, and automobiles, products with high flexibility, will be influenced. To say that the crisis will be mild in the industrial and business sectors is an over statement. The high quantity of foreign banks in Turkey is the internal cause of our crisis. Moreover, the 2001 crisis, in terms of Turkish banking systems, had positive outcomes. However, because of the abnormal number of foreign banks in Turkey, a normally disadvantageous crisis has become much more. Solution Suggestions Solution suggestions could be grouped into 3: 1. what the world needs to do 2. what Turkey needs to do, 3. what corporations need to do, 1- What the world should do I would like to tell a economic story. First we should accept that the crisis arised because of fictional money concept, not real cash money. Therefore, fictional money should be eliminated. The USA achieved that in 1933 and 1934 with precautionary measures. However, in 1999, to produce virtual money those precautionary measures legal acts abolished, thus the crisis was unavoidable. For this reason the development of virtual money and ties to derivative instruments have been forbidden. Another problematic point is that the world trade is done in Euros and US funds. The use of specific currencies gives those countries undeserved distinction and authority. For example, America can press its own currency as it wishes and in return buy goods and services from the whole world. In the same way, those countries involved in world trade prefer to use US dolars. For this reason, the system is rotten and has been observed to fail. Therefore, a central world bank should be established or the United Nations should establish a currency that can be used worldwide. In other words, there should be an international currency used worldwide. For this to be realized, every country’s contribution to the world national profit should be considered. For example, the contribution of the US to the world national profit is 14 trillion US. Turkey’s contribution is 700 million US. Every country does not contribute equally the currency profit is based on an individual basis. Thus, the whole world’s contribution and control over one currency would provide a trustworthy monetary system, thus, soon there will be more insight into this area. There is postive feedback on this topic. For example, the most recent G-20 meeting in Russia claimed such an offer. In the same concern, China also made similar requests. The first commentary on these requests was made by the US because it would be hazardous to its own wealth. 2-What Turkey Should Do In summary Turkey should use precautionary measures. The ending of the crisis should be foreseen. To reach this goal, consumption must be re-originated because of the reduced demand caused by unemployment and negative expectations. Reduced consumption and demand causes no sales or production by factories. Therefore, they dismiss employees. Unemployed individuals induce a reduction on consumption and demand. This is a vicious circle that should be eliminated. The worldwide economy gets diminished. Economic graphs demonstrate a decrease of profits. Urgently, Turkey should take precautionary measures. Turkey should convert its own economic graphics into a V or U-shape. Turkey must be one of the first countries that should do this. There are three steps; first, the crisis has ended the campaign by the media. It must furnish a secure enviroment and positive expectations into markets. Due to negative expectations those who have money do not spend it. The second is to increase the money supply. It has to be handled with foreign funds or with the pressing of money by a central bank. With the increase of money supply, real sector must be supported. This will increase production and investment. Moreover, an increase of money supply would increase demand and consumption. 257 �1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo A third step is for the government to cut taxes and make compulsory levy cuts or payment should be delayed. Consequently, money will still be in the market, indirectly, and the money supply will increase. Here we should be careful about liquid deficit. If, there is no secure environment and positive expectations in markets, liquid afflux will cause deficiency. If liquidity increases through foreign funds, the Turkish Lira will gain value. With the central bank pressing money inflation will arise. To eliminate these risks, national products should be produced and consumed. In other words, importance should be given to national goods and industry not foreign goods. How we are going to do that. 3- What Corporations Should Do 1. 2. 3. 4. 5. 6. 7. 8. 9. They have to guess the rock botoom of the crisis. And they have to rearrange their budgets. Their budgets should be based on a six month period not one year. They have to reduce credit loans. They have to give more importance to their equity capital. It means they could be lessen. They have to produce and sell products that are in demand and whose flexibility is less than others. Expenses should be reduced in a quick manner because earnings and revenue will decrease. They have to find new customers and markets. They have to organize campaigns in order to increase demands and consumption of consumers. They have to increase efficiency of the work place and labour forces. Functional flexibility should be increased. References: Anatolia Agency. (11 Kasım 2008). Đncekara, A. (2009). Küresel Kriz ve Türkiye Ekonomisi. Đstanbul. Seyidoğlu, H. (2003). Uluslar arası Đktisat. Gizem Can Yayınları, Đstanbul. Tahran, V. (2008). Global Kriz ve Türkiye. Tisk Sosyal Politika Toplantıları, Đstanbul, 5 Kasım 2008. Tuduk, M. ( 2008). Referans Gazetesi, 12 Aralık 2008. Yıldıray Y. (2009). Mortgage Krizi. Đstanbul. 258 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 212 Title A name given to the resource Global Crisis: Consequences and Solution Possibilities Author Author YAVUZ, Arif Abstract A summary of the resource. In this paper, the reasons and solutions of the 2008 global economic crisis are discussed. In the first part, a comparision of 2008 global crisis with 1929 economic crisis, the effects of each and also the differences are explained. The champions and the losers of the current crisis are interpretted. Also, the estimated duration and the expected end time of the crisis are discussed. In the second part, the effects of the crisis to the Global Economy and to some of the countries are stated. The expected effects can be summarised as, “losing of confidence in global market”, “having negative prospects”, “decreasing of the foreign trade”, “shrinking of the national incomes” ,“shrinking of demand and consumption”, “increasing of unemployment”. In the last part, some solutions for negative effects of global crisis are offered. A world economic story is stated and suggested a new International Money Currency. Restrictions for the virtual Money is recommended and also some new rules on international trade and international finance system are offered. Date A point or period of time associated with an event in the lifecycle of the resource 2009-06 Keywords Keywords. Conference or Workshop Item PeerReviewed HB Economic Theory https://omeka.ibu.edu.ba/files/original/cd44c60f3dbc6a2c158988dc8c230eb6.pdf 9670d1e52d0115a25dd9da820582dde9 PDF Text Text 1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo Global Financial Crisis and Economic Sustainability in South East Europe Nurdan ASLAN Department of Economics, University of Marmara, Turkey nuraslan@marmara.edu.tr Nuray TERZI Department of Economics, University of Marmara, Turkey nurayterzi@marmara.edu.tr Abstract: The global financial system has witnessed rapid growth and substantial structural change during the last ten years leading to globalization of financial markets. The integration of financial markets has accentuated the rapid flow of capital across borders as well as magnified the contagious effects of financial crisis with wide implications for transmission of financial policies on the domestic economy and internationally. The global financial crisis has become a major international event and has spread to developing countries through trade linkages, a reduction of FDI and remittances, and a collapse in commodity prices. The effect of the global financial crisis was worsened by rising global energy prices which pushed up inflation. The global financial crisis has evolved differently from other major crises that have hit the developing world. This paper analyzes the economic sustainability in South East Europe against global financial crisis. Keywords: global financial crisis, economic sustainability Introduction From 2002 until the end of 2007 world economic growth averaged 4.5 per cent per annum compared to 3 per cent in the 1990s. Growth has been particularly strong and broad-based in the developing world, reaching some 7.5 per cent, twice the rate of the 1990s. Real commodity prices rose to levels not seen since the 1970s and developing countries as a whole started to run trade surpluses with advanced countries private capital flows to developing countries recovered strongly and spreads on emerging-market debt fell to historical lows. Price stability in the developing world has been unprecedented for many decades, with single-digit inflation rates being the rule rather than the exception (Akyuz, 2008). As a result of continued deregulation of financial markets and further opening of national borders to international capital flows, economic activity in both advanced and developing countries has come to be increasingly shaped by financial factors. Low interest rates in some other advanced countries, notably in Japan, encouraged cross-currency flows towards countries with higher interest rates, including in the form of highly leveraged carry trades. The very same factors have played a major role in the strong recovery of capital flows to emerging markets, contributing to currency appreciations, asset bubbles and credit expansion, and stimulating spending and growth in the recipient countries (Akyuz, 2008). In recent decades, world trade has shown two important characteristics. First of all, it has tended to expand more rapidly than world production, a process that has been accompanied 2008 by a rapid diversification in the trade structure. Thus, during the recent boom, in 2003-2006, world trade grew at an annual rate of 9.3%, more than twice the rate of growth of world output (3.8%). Second, these rates of growth have been highly elastic to world output through the business cycle and have, therefore, been more volatile than world production (UNDP, 2009). These conditions have been replaced since mid-2008, particularly since September 2008, by the effects of financial turmoil that erupted in mid-2007 in the U.S. which has now become the worst global financial crisis and the worst recession since the Great Depression (UNDP, 2009). This financial crisis quickly spread to emerging market and developing economies. Investors have pulled capital from countries, even those with small levels of perceived risk, and caused values of stocks and domestic currencies to plunge. Also, slumping exports and commodity prices have added to the woes, pushing economies world wide either into recession or into a period of slow economic growth (Nanto, 2009). The current financial crisis has imposed a heavy economic burden on many countries and significantly increased the incidence of poverty and vulnerability. This paper analyzes the economic sustainability in South East Europe against global financial crisis. The following section gives the channels of transmission of the crisis 10 �1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo to developing countries. Third section presents the economic conditions in South East Europe economies. Last section provides a conclusion. The Channels of Transmission of the Crisis to Developing Countries The current economic and financial crisis was driven by the reversal of the three positive shocks that developing countries experienced during the recent boom period: exceptional financing, high commodity prices and large flows of remittances. The initial trigger that contributed to the reversals of these trends was the impact of the bursting of the U.S. housing bubble. The emerging recession in the United States and other developed countries further multiplied the negative impact of the crisis for developing countries (UNDP, 2009). The one of the main channel of transmission of the crisis to exporters of manufactures and services is a decline in trade volumes and exporters of primary goods can be affected by declining prices. Falling energy prices can benefit energy importing countries but they can also lead to reduced investment and economic activity in commodity-dependent developing countries (UNDP, 2009). The deterioration in financing conditions has been most severe for countries with large current account deficits. These countries showed signs of overheating and unsustainably rapid credit growth prior to the intensification of the financial crisis. About half of all developing countries have been running current account deficits of 5 percent of GDP or more, and in some cases the deficits are around 10 percent. Developing countries will be highly vulnerable to swings in various sources in external financing in coming years (Lin,2008). The second channel for transmission of the crisis from developed to developing countries is via capital flows. The effects take place both through volumes and associated costs of such flows (UNDP, 2009). According to World Bank, private capital flows to developing countries are likely to fall significantly in 2009, led by pull-backs in portfolio flows and international bank lending. Large portfolio and foreign bank lending flows have contributed to rapid growth in credit to the private sector and large private-sector driven current account deficits in a number of countries. The sudden deceleration of inflows will force a sharp adjustment in private-sector activity. There is a high probability of balance sheet deterioration and possible banking crises where banks and non-bank financial institutions have expanded credit to the private sector most rapidly. There may be an especially direct channel in economies where there has been substantial borrowing from foreign banks, either through branches in the domestic market or through borrowing by local banks. Central and Eastern European economies, which have experienced especially rapid credit increases, with foreign banks playing a dominant role in the domestic market, could be most at risk (World Bank, 2008). In addition, the current global financial crisis influences firms’ capacity to invest as a result of reduced availability of finance and their propensity to invest due to gloomy economic and markets prospects. Financial factors have negatively affected TNCs’ capacity to invest, both internally and externally, as tighter credit conditions and lower corporate profits curtail TNCs’ financial resources for overseas investment projects. On the one hand, credit has become less abundant and more expensive. The gloomy evolution of markets, including the looming sharp economic recession worldwide and a heightened appreciation of risk, has also reduced firms’ propensity to invest for further expansion both domestically and internationally of production capacity. Companies’ investment plans may also be scaled back due to a high level of perceived risks and uncertainties, in order to develop resilience to possible “worst-case” scenarios regarding financial and economic conditions (UNCTAD, 2009). Investment was the main driving force for developing-country growth over the past 5 years, contributing almost half of the increase in domestic demand. But the crisis will deal a negative shock to investment in developing markets. It is expected investment in middle-income countries in 2009 to grow at less than half the 2007 rate of 13 percent (Lin, 2008). In South East Europe, foreign direct investment is expected to decline sharply in 2009. The Economist Intelligence Unit predicts a decrease in FDI in some South East Europe countries. The last channel of the crisis is remittances. Migrant remittances represent the most direct, immediate and far reaching benefit to migrants and their countries of origin. They are a more constant source of income to developing countries than official development assistance, foreign direct investment and other private flows. Moreover, the emergence of remittances as a new strategy for poverty alleviation in developing countries has spurred multilateral institutions, international organizations, and national governments, among others, to seriously study, identify and implement measures on how these inflows could be maximized and then harnessed for the development of migrants’ countries of origin (Pant, 2008). As labor markets slacken, foreign workers are likely to suffer disproportionate impacts on their earnings, which will reduce remittances. Remittances from host countries are expected to be decline in response to the global slowdown but the impact on flows to recipient countries will depend significantly on exchange rates. According to World Bank (2008) in 28 countries, remittances to developing countries were larger than revenues from the most important commodity export, and in 36 countries they were larger than private and 11 �1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo public capital inflows. They are also a powerful poverty reduction mechanism. For example, in Nicaragua remittances reduce poverty incidence by four percentage points on average, and five percentage points in urban areas. In Albania, households with migrants to Italy and Greece have an incidence of poverty that is half the national rate (i.e., 15 and 19 percent compared to an average of 32 percent). Remittance flows from host to developing countries, which reached an estimated $295 billion in 2008, began slowing in the second half of 2008 and are projected to slow sharply in 2009. The Economic Sustainability in South East Europe Economic sustainability requires that economic benefits exceed or at least balance costs and conditioned mainly by supply and demand. South East Europe Countries, under the current financial crisis, try to achieve their economic sustainability. Is it possible to achieve this aim for South East Europe countries next three years? Following section tries to answer this question. Before current financial crisis, the growth in real GDP in South East Europe was pretty good. Especially, Montenegro has a high growth rate. But most of them started to have a decrease in their GDP in 2007. According to estimates, the SEE countries are expected to suffer a significant drop in GDP: the Albania, Bulgaria, Croatia, Romania, Bosnia and Herzegovina, FYR Macedonia, Montenegro and Serbia. Graph 1 provides the developments 2005-2008 and outlook 2009-2011. The most of the countries in SEE may start growing again in 2010 and 2011. However, Bosnia and Herzegovina may take this process slower than the other SEE countries (Graph 1). Source: EBRD Transition Report 2007; wiiw 2009. *2009-2011 forecast. Graph 1: Growth in real GDP in South East Europe, 2005-2011 The degree of the financial openness shows integration with the rest of the world. Financial openness has followed a fluctuation during the past decade in the region. Although the financial crises in the end of the 1990s had a negative effect on the capital flows tin SEE countries, the financial openness increased between 2001 and 2005 and the most of the SEE countries experienced an increase in the financial depth in this term. The amount of M2 as a percentage of GDP increased the most of the SEE countries: Albania, Croatia, Romania, Macedonia and Bulgaria. The other important thing is an increase in foreign banks in the region. The amount of foreign banks increased significantly in SEE countries between 1995 and 2006 (Terzi, 2009). The SEE foreign banks and non-bank financial institutions have over the past decade accounted for more than half of the corporate lending market and two thirds of the home-loan business. The countries are strongly dependent on foreign currency lending, which has mainly been provided by foreign banks to their southeastern subsidiaries. With the credit freeze domestic banks and local companies are finding it increasingly difficult to refinance their foreign debt holdings. A lack of credit availability from foreign institutions is particularly dire when it is also affecting successful firms in the region. Export capacity in the region is dependent on trade finance being by local banks at affordable rates. But local credit availability is currently 12 �1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo drying up. Moreover, the interest rate on export finance loans to Bulgaria, Serbia or Romania has gone from 1.2 percent above libor to about six percentage point higher (Bastian, 2009). In addition, global financial crisis affected the external liabilities in the region. Data from the Bank for International Settlements shows that East, Central and Southeast European Banks accumulated total external liabilities to banks that report to the BIS of USD 1.657 trillion as of September 2008. USD 1.511 trillion of that total amounts is owed to euro-zone commercial banks (Bastian, 2009). Another effect of the current financial crisis is on the consumer prices. Under the impact of the international crisis, the most of SEE countries have reached a point where high inflation is likely to depress credit growth in 2008 (EBRD, 2008). The inflation in the region is expected to decline in 2009. The forecasts in 2010-11 show that the inflation may increase again in this area (Graph 2). Graph 2. Consumer Prices in South East Europe, 2005-2011 (change in % against previous year) Source: EBRD Transition Report 2007; wiiw 2009.*2009-2011 forecast. Current account deficit is important indicator for the countries to see the effect of the crises. All SEE countries, the current account deficit in 2008 exceed 10 % of GDP. It ran as high as 27% in Montenegro, 25% in Bulgaria and 18% in Serbia, while it ranged between 10 and 15 % in Albania, Croatia, Macedonia and Romania. The current account deficits in the SEE are high in general. As many East Europe Countries run large current account deficit, they are dependent on foreign capital and loans to continue their operations. The forecasts show a decrease in their current account deficits in 2010-2011(Graph 3). Graph 3. Current Account in South East Europe, 2005-2011 (in % of GDP) Source: EBRD Transition Report 2007; wiiw 2009. *2009-2011 forecast. 13 �1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo The government deficit in SEE countries will probably increase in both 2009 and 2010. The main reason will be a combination of lower revenues and overextended expenditures. The increase in expenditures will mainly stem from the need to support ailing financial and non-financial companies and pay out higher unemployment benefits. Under such circumstances, the countries in question will hardly be in a position to enact substantial demand-stimulating fiscal policies over a long period (wiiw, 2009). In terms of foreign direct investment, the year 2008 marked the end of a growth cycle in international investment that started in 2004 and saw world foreign direct investment flows reach a historic record of $1.8 trillion in 2007. Due to the impact of the ongoing worldwide financial and economic crisis, FDI flow decline by more than 20 per cent in 2008. A further decrease in FDI flows can be expected in 2009, as the full consequences of the crisis on transnational corporations’ investment expenditures will continue to unfold (UNCTAD, 2009). Romania is one of the most attractive countries in South East Europe in terms of foreign direct investment. Croatia and Bulgaria also attract the foreign direct investment. The rest of the region has less foreign direct investment than the other countries. Until 2007, the flow of foreign direct investment to South East Europe was pretty good (Tab.1). However, foreign direct investment is expected to decline sharply in 2009. The Economist Intelligence Unit predicts a decrease by 46 percent between 2008 and 2009, with FDI considerably declining in Romania, Montenegro, Serbia and Bulgaria. Table 1. Foreign Direct Investment (in US$ million), 2005-2007 2005 2006 2,298 5,016 Bulgaria 1,548 3,516 Croatia 6,587 11,430 Romania 265 300 Albania 667 723 Bosnia and Herzegovina 97 350 FYR, Macedonia 474 550 Montenegro 1,481 4,400 Serbia Source: EBRD, Transition Report, 2007 2007 3,090 2,363 9,600 400 791 150 161 3000 South East Europe countries experienced a high unemployment rates. The unemployment rate in the most of the region is more than 10%. Bosnia and Herzegovina, Macedonia, Montenegro and Serbia have a higher unemployment rate than the others. Moreover, the forecasts show that the unemployment in this region will continue to stay a high rate in next two years (Graph 4). Especially, the unemployment rates in Bulgaria and Romania are expected to come up a high level in 2009. Graph 4. Unemployment, rate in %, annual average, 2007-2011 Source: wiiw, 2009; Labour Force Survey. *2009-2011 forecast. Migrant workers’ transfers in the Southeastern Europe constitute a major economic factor. In 2007 remittances as a share of GDP reached 17.2 percent in Bosnia & Herzegovina, 10 percent in Albania (Tab. 2). Remittances slightly increased in 2008. But the economic crisis will leave its mark on migrant workers’ continued ability to transfer such amounts back home. Many of these labors are employed in sectors adversely affected by the recession in their host countries, in particular in car manufacturing, construction and household 14 �1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo work. A decline in remittances from relatives working abroad will affect families and their income expectations during 2009 (Bastian, 2009). Table 2. Workers’ Remittances in the SEE (US $ Million) 2007 2008 In % of GDP (2007) 1.071 1.071 10.1 Albania 2.520 2.600 17.2 Bosnia&Herzegovina 2.086 2.200 5.7 Bulgaria 267 315 3.6 Macedonia,FYR 8.533 9.000 5.6 Romania 4.910 5.100 13.8 Serbia + Montenegro Source: World Bank estimates based on the International Monetary Fund's Balance of Payments Statistics Yearbook 2008 and World Bank, Migration and Remittances Factbook 2008. Conclusion The world economy is going through difficult times. The turmoil in the international financial markets over the last year is having an increasingly adverse effect on the SEE countries. Under the current financial crisis, the growth in South East Europe will probably decrease and consumer prices will likely go down in 2009. South East Europe countries have been running current account deficits of 5 percent of GDP or more. These economies will be highly vulnerable to swings. The crisis will deal a negative shock to investment in South East Europe. This will lead to a decline foreign direct investment. Unemployment will continue to go up. And as labor market slacken, foreign workers are likely to suffer negative effects on their earnings, will reduce remittances. The full impact of the financial turmoil will depend on the behaviour of the countries economy policies in the next three years. References Akyuz, Y. (2008). The Current Global Financial Turmoil and Asian Developing Countries. TWN, Malaysia. Bastian, J.(2009). Falling Behind Again ? Southeast Europe and The Global Crisis. Eliamep Thesis. March. EBRD (2008). Transition Report. Lin, J.Y. (2008). The Impact of the Financial Crisis on Developing Countries. Korea Development Institute. Nanto, D.K. (2009). The Global Financial Crisis: Analysis and Policy Implications. CRS RL 34742. Pant, B. (2008). Mobilizing Remittances for Productive Use: A Policy-Oriented Approach. NRB Working Paper 4. Terzi, N. (2009). Financial Globalization And Development in SEE. Journal of Academic Studies, Vol.11, No. 40. FebruaryApril. UNCTAD (2009). Assessing the Impact of the Current Financial and Economic Crisis on Global FDI Flows, UNCTAD. UNDP.(2009). The Financial Crisis and Its Impact on Developing Countries”, Working Paper, UNDP. Wiiw (2009). wiiw Forecast for Central, “East and Southeast Europe, Kazakhstan and China: Differentiated Impact of the Global Crisis”. World Bank (2008). Global Financial Crisis and Implications for Developing Countries. G-20 Finance Ministers’ Meeting Brazil. 15 � https://omeka.ibu.edu.ba/files/original/bac7a9752159c374897bd56294632567.doc c548a96c734e7a52a88c042aa05083cf Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 127 Title A name given to the resource Global Financial Crisis and Economic Sustainability in South East Europe Author Author ASLAN, Nurdan TERZI, Nuray Abstract A summary of the resource. The global financial system has witnessed rapid growth and substantial structural change during the last ten years leading to globalization of financial markets. The integration of financial markets has accentuated the rapid flow of capital across borders as well as magnified the contagious effects of financial crisis with wide implications for transmission of financial policies on the domestic economy and internationally. The global financial crisis has become a major international event and has spread to developing countries through trade linkages, a reduction of FDI and remittances, and a collapse in commodity prices. The effect of the global financial crisis was worsened by rising global energy prices which pushed up inflation. The global financial crisis has evolved differently from other major crises that have hit the developing world. This paper analyzes the economic sustainability in South East Europe against global financial crisis. Date A point or period of time associated with an event in the lifecycle of the resource 2009-06 Keywords Keywords. Conference or Workshop Item PeerReviewed HB Economic Theory https://omeka.ibu.edu.ba/files/original/1623a69b95ca04ef9f17f7dd8b2deb70.pdf e24e0bdad8a3ef387827fbd6d5245501 PDF Text Text 1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo Global Financial Crisis and Its Impact on Balkans Ergin ĐSMAĐL President of COFER, Macedonia e.ismail@coferweb.org Semi ŞAHĐN Finance Director of COFER, Macedonia s.sahin@coferweb.org Abstract: The aim of writing this paper is to reveal that the implication of the crisis to the western Balkans has been not of a sort of financial crisis, but an economic turbulence which has occurred as a result of lack of demand in the world markets to the western Balkan products and falling sources of finance. Expansionary fiscal policies on top of external trade deficits growing at record levels, calls into question the ability of the western Balkan economies to finance the needs, that in turn increases their vulnerability and that may lead to a possible financial crisis in future if the global financial crisis continues to sustain until 2010. What is expected to ease the conditions is the seasonally strong increase in construction, food exports and private transfers during the spring and summer seasons, expected to close the gaps that are being established through growing external trade deficits. Increase in construction business, growing food exports and raising remittances may offset vulnerabilities of the economies and may limit further economic and financial crisis in the region. Keywords: global financial crisis; Balkans; growth; unemployment; remittances Financial Crisis in the World, Economic Crisis in the Balkans What started as a global financial crisis has become an economic crisis. The world financial crisis emerged from a property bubble and a credit boom. Bad debts soared and banking sector in the developed economies became insolvent. The implication of the crisis to the western Balkans has been not of a sort of financial crisis, but an economic turbulence which has occurred as a result of lack of demand in the world markets to the western Balkan products and falling sources of finance. Investments, remittances, industrial production, foreign exchange reserves and employment rates have fallen. As a result, growth has slowed down. Expansionary fiscal policies on top of external trade deficits growing at record levels, calls into question the ability of the western Balkan economies to finance the needs, that in turn increases their vulnerability and that may lead to a possible financial crisis in future if the global financial crisis continues to sustain until 2010. The governments of the region of the western Balkans, when the crisis hit in September 2008, argued that they were immune to the crisis. However, as their export-oriented economies began to slump in the autumn of 2008 due to the slid in the world commodity prices, which resulted in tens of thousands of citizens of western Balkan countries loosing their jobs, the governments of the region became more open about the difficulties of their economic situation, although continuing to argue that the effects of the financial crisis are least to be felt in western Balkans in comparison with other regional economies of Europe such as that felt in Iceland, Baltic states or Ukraine. The culprit many of the governments have now settled on is the world out of Balkans. Even wider publics took comfort of this argument due to relatively low exposure of the local economies to the world financial markets. Although the governments continue to predict that the economies would show growth and small contraction in 2009, the economic indicators show that the economies are in some degree of trouble at the moment with industrial output, foreign investment and remittances falling and unemployment rising.1 Growth forecasts are down across the region from 5 to 3%, investors are slowing projects and governments are drawing up rescue plans.2 Independent economists think that 3% growth of GDP for 2009 is wildly optimistic. Depending on the world manufacturing and commodity prices, they could show growth by 2 or even 1% of GDP. For the small economies of a scale of western Balkans that have boomed for the past seven-eight years, following the end of conflicts in the region in 2001 - that last one being the conflict of Macedonia in 2001 - with 1 2 The Economist, "The Balkans: A year in the life of Kosovo", 14 February 2009, p. 14. The Economist, "The western Balkans: A stuck region", 14 February 2009, p. 36. 381 �1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo annual average GDP growth reaching 5%, economic slowdown and contraction in GDP that has started to be seen starting from the autumn of 2008 is a particularly harsh blow to western Balkans. The whole region, except Serbia and Croatia, has escaped the global financial crisis however it has run into economic crisis due to the recession in its export markets, including EU. As small open economies the western Balkan countries are uncomfortably exposed to the world crisis and particularly to EU as their trade with the EU member states comprises their largest trade volume. Since the global financial crisis hit in September 2008 growth has turned to contraction and unemployment is mounting in the region. Also, any lingering hopes that the western Balkans might escape relatively unscathed from the global financial storms were dashed when managers of the foreign banks in the region, mainly those of Austria and Greece, sought support from the international finance institutions. This shows that, although the economies are small and relatively well protected, they are exposed to the global financial crisis that has been replicated in the region in the form of economic crisis. The falling manufacturing and commodity prices in the world markets are causing problems. Depended on steel and metal exports, the region has been hit hard by the global slump in commodity prices and by the expensive imported electricity, sending metal prices into a tailspin. The price of the metals has fallen by almost two-thirds since mid-2008 leading to slowdown in the region's economies. More than a fifth of economic output and employment are based on exports, making them particularly vulnerable to a fall in global growth and trade. Manufacturing and exporting economies are grinding to a halt, as demand across the world melts away. The western Balkan economies contracted further in last quarter of 2008, as a dispute between Russia and Ukraine over gas prices reduced energy supply to the region and forced the countries' heavy industries to go slow, cutting production or even halting assembly lines. For example, Silmak, a significant producer of ferro-nickel in Jegunovce, in the western part of Macedonia, has cut production and has laid 700 workers due to the drastic fall of the ferro-nickel's price in the world markets.1 The nearby brick factory Kiro Kucuk in Veles, in the central part of Macedonia, also exemplifies the gravity of the setback. On 1 March 2009 the employees turned up for their final day's work. The factory will not reopen until the economy recovers.2 A similar story could be told in many countries of the region. Macedonia is not alone depended on exporting metallurgical industries. Serbia has suffered far more as global demand for the goods in which its industry specialises has evaporated. For example, US Steel, one of Serbia's leading exporters, closed one plant.3 These examples are reflection of the data released for January 2009 that industrial production, which accounts for a fifth of total value added in Macedonia4 and Serbia has plummeted by 17%, its steepest fall in years.5 The Macedonian State Statistics Office reported that the local companies have been operating by using 50% of their capacities in the course of January 2009 and their situation has deteriorated on a monthly basis, which has led to a drop in employment rate as well as a large fall in production due to the reduced foreign demand for Macedonian products, insufficient domestic demand, uncertain economic situation and the financial problems. These are hotbeds that might be transferred to other economic sectors, such as the textile and leather industry and to the construction sector, which comprise large share in the country's GDP. The gloom reflects growing worries about underlying weaknesses that make the countries especially vulnerable to recession happening in the EU and other economies to which Balkan economies are depended. So companies have announced big lay-offs as demand has fallen and factories have closed.6 The official unemployment figure of Macedonia already stands at 33% (unofficially it is probably 35% or more) and is set to rise as the new basic salary estimates will only count employed those who pay social security benefits. Unemployment rate in Bosnia and Herzegovina and in Kosovo are more than 40%. The unofficial unemployment rate is, however, much higher and many who say that they have jobs are in fact on indefinite unpaid leave. The economists forecast that unemployment region-wide will rise. Most of that rise will be the result of fall in trade (many exporting companies have laid off workers), and due to declining investments. Coffee streets from Knjez Mihajlova in Belgrade to Kej Vardar in Skopje to Bash Charshija in Sarajevo are busy during sunlight as young people, forming more than 50% of the unemployed force in the region, sip their coffees. Unemployment rates are soaring and offices of the Employment Agencies in whole region are full with people looking for work. The stock markets have plunged as well. The Zagreb stock exchange index lost 42% during the last quarter of 2008 and others such as Sarajevo Stock Exchange, dropped by 19% during the same quarter, leading 1 Dnevnik, "Silmak prekina so rabota", 2 Mart 2009, p. 7. Utrinski, "Rabotnicite od Kucuk izvisija", 3 Mart 2009. 3 European Commission, DG ECFIN, EU Candidate and Pre-Accession Countries Economic Quarterly, 9 January 2009, p. 30. 4 Ibid, p. 10. 5 Utrinski, "Pad na proizvodstvoto za 16.7%", 27 February 2009. 6 International Monetary Fund, "Former Yugoslav Republic of Macedonia: Staff Report for the 2008 Article IV Consultation", Prepared by Staff Representatives for the 2008 Consultation with Former Yugoslav Republic of Macedonia, 11 November 2008, p. 11. 2 382 �1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo to an annual decrease of 67% in 2008.1 The Belgrade Stock Exchange tumbled and its index lost 75% during 2008.2 An important sector that waits to be affected is the real estate market as the credits have gone down and the borrowers are unable to pay back their monthly loans. The scale of the bubble in the region is as big as in troubling EU cities. House prices rose further in Belgrade than they did in Tirana. So did commercial-property prices. As a result, demand for new homes has dried up although prices have remained stable and over inflated, with Belgrade topping the prices where average residential square meter is sold at 2000 euros. The housing boom in the region is among the extreme, measured by real price increases and resulting overvaluations. This is a bubble which is waiting to burst. Another bubble which is waiting to burst is commercial property where office blocks and shops are overvalued. Both these booms have been fuelled by debt, another reason why the region looks particularly vulnerable now. There is much to suggest that the pain is felt most by small enterprises, labelled as small and medium sized enterprises (SMEs) that are the backbone of the western Balkan economies. SMEs seem especially vulnerable to the downturn. Many specialise in textile and these are also the products whose orders are the first to be cancelled when economies slow and companies trim investment. These firms are finding themselves chronically short of orders and capital. The governments in the region have launched actions to stimulate their economies. Montenegrin government launched a plan with significant capital expenditures and other stimulus to businesses at some 10% of the projected GDP for 2009.3 In November 2008, the Macedonian government unveiled measures worth 5-6% of GDP.4 Other governments as well have unveiled packages that include extra billions to finance investment, infrastructure projects, extra benefits for poorer and tax cuts. The central banks as well have joined in tightening monetary policies and increasing controls of the credit markets. These measures mean the economy may suffer only a mild downturn. Tightening of control by the central banks has encouraged banks to drastically decrease the amount of lending. When there are no loans for companies and consumers, the consumption of domestic and foreign products decreases, leading towards economic stagnation. So officials are also trying to inject cash and confidence into the banking system, avoiding confidence crisis that in October 2008 hit Albania, Bosnia and Herzegovina, Montenegro and Serbia where the lack of confidence led to a withdrawal of deposits by population.5 They have done this in various ways. Croatian central bank has abolished reserve requirements. The Bank of Albania has limited Banks' exposure towards their foreign parent companies.6 The National Bank of Serbia has eliminated the tax on savings income to help boost foreign exchange liquidity.7 The Bosnian central bank has increased the level of guaranteed savings deposits from 3500 to 10.000 euros and the Montenegrin government has given full guarantee to deposits. The Montenegrin government has also given capital boost to ailing Prva Banka to allow it to expand landing, especially for small businesses.8 The global crisis has slowed down western Balkans' credit-fuelled boom. Estimates of output have slumped and currencies have dropped as capital inflows have dried up. The bad debts have raised as local customers default particularly those that have borrowed in foreign currencies that have since risen relative to their own. One of the dirty habits from the boom is that as local loan growth outpaced deposit growth.9 There is likelihood that one or more of the ex-communist Balkan countries will default on its debt. The biggest weakness lies in a financial system that has combined badly run local banks with loosely overseen subsidiaries of western ones. Some local banks now depend on their parents' willingness to keep financing them – and those parents have plenty of problems at home. The Greek government has told its banks to draw back from their lending in the Balkans. Debt burdens are high today because so much was borrowed in the recent past. This began as a logical response to declining interest rates, low inflation, rising asset prices and less frequent recessions. Some countries have an extra problem of big external government debts (in Croatia's case, the gross figure is near 85% of GDP). For other countries, the strong Euro is a problem; they have pegged their currencies to it.10 Tumbling exchange rates raised the real burden of foreign-currency loans, forced policymakers to keep interest rates high. However, by boosting exports, a weaker currency can offer a route to recovery. In Macedonia, by contrast, denar stays strong as the economy slumps, deflation setting in which will lead debts to grow and possibly banking problems to grow. Possible threat of financial crisis has led the Euro to be seen as a shelter for western Balkan economies from the storms. The local currencies dinar of Serbia, kuna of Croatia, lek 1 European Commission, DG ECFIN, p. 23. Ibid, p. 31. 3 Ibid, p. 26. 4 Ibid, p. 10. 5 Ibid, p. 3. 6 Ibid, p. 18. 7 Ibid, p. 31. 8 Ibid, p. 27. 9 The Economist, "Eastern European banks: The ties that band", 21 February 2009, p. 73. 10 The Economist, "Eastern Europe: Argentina on the Danube?", 21 February 2009, p. 14. 2 383 �1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo of Albania have lost their value against the Euro. Kuna depreciated by 2.9% and lek 1% vis-à-vis the euro in the last quarter of 2008,1 where as the Serbia's dinar has lost close to 17% of its value against the Euro in the same period. The central bank of Macedonia has spent over 50 million euros of its reserves in January 2009 alone, largest since the introduction of denar in early 1990s, to cushion the devaluation of its currency and avoid public panic.2 Macedonia will suffer damages if the Euro loses its value in relation to the dollar as it would affect the Macedonian export to EU markets. The increase of the dollar value will also have negative implications for Macedonia as the country uses this foreign currency to purchase twice as much as it sells. The value of the Euro in comparison to the dollar has been declining since autumn 2008. The drop of the value of the Euro with this fixed course of the denar in relation to the Euro currency will damage the Macedonian economy and de-motivate exporters primarily exporting to EU states.3 The government in Macedonia also has shredded investor confidence by calling for decreasing the amounts given to private pension funds. Recovery is possible only through strong demand in the rest of the world (which is to lack for some time), that would lead exports to soar, allowing quick recovery. However, today demand is falling rapidly across the globe and most big developed economies buying Balkans products face simultaneous banking crises. With demand weak everywhere, the familiar route to recovery is blocked.4 For the largest trading partners of western Balkan economies, the EU countries, figures that came out in February 2009, showed that Euro-area GDP shrank at an annualised rate of around 5% in the fourth quarter of 2008. The IMF has forecasted that Euro-area GDP will decline by 2% in 2009 and barely recover in 2010. Countries with huge current-account deficits are most exposed in a credit drought. So the hope had been that weaker economies of Balkans would be offset by faster economic recovery in EU economies and support by the local banks mother banks' in EU. Unfortunately, the EU economies are facing recession and mother banks and mother countries have asked them to lend first to domestic businesses and households and not to transfer money to their subsidiaries in Balkans. The Greeks publicly advised banks to be more prudent about transferring bail-out funds to Balkan subsidiaries.5 The western Balkan countries face a current account deficit this year in average of around 14%. Nevertheless, the crisis for example has not stopped the Macedonian and Kosovar governments from doling out billions of euros' worth of cultural projects. Financial crisis is also having effect on remittances, a large share in GDP of the economies of Balkans. Foreign workers have been first to be laid off in the western economies. Remittances make up more than a tenth of the GDP of Balkan economies. Although they are likely to fall as a result of the slumping world economy, as it has been the case with Albania, where remittances' inflows have declined from 13% of GDP in 2007 to 11% of GDP in the last quarter of 2008,6 they may be less affected by the world economy.7 It is expected that people keep the cross border payments going even when their incomes fall. Migration from western Balkans to EU countries is expected to rise as the borders are getting opened through visa facilitation and liberalisation programmes. However, this rise will be balanced with the recession in the EU economies where it means fewer jobs for migrants. In surveys, the economy has leapt to the top of voters' concerns. Overall the public is scared and uncertain. So far, the Balkans has escaped the civic unrest seen in the Baltic States, Iceland, or elsewhere.8 There are not yet signs of discontent, except concerns expressed by politicians and economists. Thousands taking to the streets to protest against crises in Baltic States and Ukraine have not resembled in Balkans. However, pundits predict unrest in towns that rely entirely on one ailing factory or industry. But so far the signs are limited. The middle class in the whole region is under a great threat. The middle class flourished during communist times. As economy goes into reverse they may well be hit harder than the rich or poor. They work in export industries so their jobs are unsafe. The other part of the middle class, who are employed in the state administration, and whose jobs are relatively safe, they have started to borrow, so are hurt by the credit crunch. To End with a Negative and a Positive Note The economies of the Balkan region, except those of Serbia and Croatia, have escaped the financial crisis. However they are facing the biggest economic crisis since 1991, when they left the communism regime. Corporate profits have collapsed. Big manufacturers' output is down. Metal producers have halved or halted their 1 European Commission, DG ECFIN, p. 7. Biljana Krstevska, "Stopeni uste 53 milioni evra", Dnevnik, 27 February 2009; Utrinski, "Samo so dobra plata do kredit", 27 February 2009. 3 Abdulmenaf Bexheti, "Experts on Fixed Course of Denar", Skopjediem, 25 February 2009. 4 The Economist, "America's banking crisis: Worse than Japan?", 14 February 2009, p. 76. 5 The Economist, "Charlemagne: Single-market blues", 7 February 2009, p. 30. 6 European Commission, DG ECFIN, p. 19. 7 The Economist, "Remittances: Trickle-down economics", 21 February 2009, p. 74. 8 The Economist, "The western Balkans: A stuck region", 14 February 2009, p. 36. 2 384 �1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo production. Companies have slashed jobs and investment. Industrial output and employment have fallen at record levels not seen since 1991. What is expected to ease the conditions is the seasonally strong increase in construction, food exports and private transfers (workers remittances) during the spring and summer seasons. These seasonal effects are expected to close the gaps that are being established through growing external trade deficits. Increase in construction business, growing food exports and raising remittances may offset vulnerabilities of the economies and may limit further economic and financial crisis in the region. 385 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 278 Title A name given to the resource Global Financial Crisis and Its Impact on Balkans Author Author iSMAiL, Ergin SAHiN, Semi Abstract A summary of the resource. The aim of writing this paper is to reveal that the implication of the crisis to the western Balkans has been not of a sort of financial crisis, but an economic turbulence which has occurred as a result of lack of demand in the world markets to the western Balkan products and falling sources of finance. Expansionary fiscal policies on top of external trade deficits growing at record levels, calls into question the ability of the western Balkan economies to finance the needs, that in turn increases their vulnerability and that may lead to a possible financial crisis in future if the global financial crisis continues to sustain until 2010. What is expected to ease the conditions is the seasonally strong increase in construction, food exports and private transfers during the spring and summer seasons, expected to close the gaps that are being established through growing external trade deficits. Increase in construction business, growing food exports and raising remittances may offset vulnerabilities of the economies and may limit further economic and financial crisis in the region. Date A point or period of time associated with an event in the lifecycle of the resource 2009-06 Keywords Keywords. Conference or Workshop Item PeerReviewed HB Economic Theory https://omeka.ibu.edu.ba/files/original/2714c8c9acbd99ce7429aae01f84bd5b.pdf 2e1af8003dd9929120ef752f6df24450 PDF Text Text 2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo Global Financial Crisis: Economic Austerity Measures Of Turkey Merve KILIÇ Fatih University, Turkey mervekilic@fatih.edu.tr Abstract: The global financial crisis has been the worst financial crisis since the one related to the Great Depression of the 1930s. It contributed to widespread business contraction, increases in unemployment, shrinking government revenues, declines in consumer wealth, and so a significant decline in economic activity. Many causes have been cited about the global financial crisis by leading economists and experts. Both market-based and regulatory solutions have been presented to lessen the dramatic effects of the crisis. The collapse of a housing bubble, which peaked in the United States in 2006, erupted in 2007 and led to a global financial crisis in 2008. This crisis has been triggered by a dramatic rise in mortgage delinquencies and foreclosures in the U.S. and has caused the values of securities tied to housing prices. So it has damaged financial institutions all over the world. The financial crisis which began in industrialized countries quickly spread to emerging and developing economies. Questions about bank liquidity, declines in credit availability, and damaged investor confidence had a negative impact on global markets, and caused large losses during 2008. This global crisis also affected Turkey. But the effects of this crisis on Turkey were limited. Demand in global and national markets has decreased. So the trade level in both national and global markets has also decreased. Bank‘s liquidity and profitability seemed healthy during such a crucial crisis. There were several policies of Turkish Government to diminish the effects of financial crisis about interest rates, tax rates, exports rediscount credit limit etc. This study aims to analyze the effects of the global financial crisis and the measures taken by Turkey to lessen the negative effects of it on Turkish economy. Introduction A first glance at Turkey‘s performance in the current global financial crisis shows that it has managed to weather the global stormy conditions relatively well. Although Turkey has been negatively affected by this crisis, it has succeeded to avoid collapsing into a currency and financial crisis. Activity in the real sector has contracted sharply, mainly as a result of both collapsing external demand and strongly declining domestic demand. A financial crisis similar to those in the 1990s and in 2000/2001 has been avoided before. Experiences of Turkey from those previous crises have conserved it from the last global financial crisis. However there are still negative signals in the economy that have occurred because of old vulnerabilities of the Turkish economy. Warning indications that the Turkish economy include developments related to the timing of the economic slowdown, the fairly large correction of the exchange rate at the beginning of the crisis, concerns regarding the external indebtedness of the private sector and the numerous voices calling for policy anchors, such as the introduction of binding fiscal rules or a new IMF arrangement (Macovei, 2009). This global financial has affected not only U.S., but also all the countries in the world. 2008-2009 financial crisis was the deepest one since 1929 Great Depression. Governments have taken several measures to decrease the effects of this crisis in their countries. Turkish Government also has taken several measures toward global financial crisis. Although Turkey experienced crises before, this last one was different from others. 1990s and 2000/2001 crises of Turkey were triggered by domestic instability rather than international factors. The main purpose of this paper is to analyze the economic austerity measures of Turkey to lessen the affects of the global financial crisis. In this paper general causes and the consequences of the crisis will be also assessed. The market collapse which started in U.S. now dispersed all over the countries and affected the world economy. As a developing country, Turkey, has applied several policies. Those policies should be some different than Turkey applied in prior crisis, because the causes of the last one was so different. The paper is organized as follows. The second section analyzes the causes and consequences of the Global Financial Crisis which has occurred in the U.S. The third part explains the effects of this crisis on Turkish Economy. 712 �2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo The economic austerity measures which have been taken by Turkish Government have been explained in the fourth section. The last section gives the conclusions of this study. Causes and Consequences of the 2008-2009 Global Financial Crises The turmoil in the U.S. subprime mortgage market, which erupted in the second half of 2007, started to spillover to the overall markets challenging both financial and economic stability. There are mainly two reasons underlying the widespread and devastating effects of this crisis. The first one of these is globalization phenomenon that has gained pace early 1980s reaching peak 2000s. Globalization led to financial and economic systems to be highly integrated. The second one is that this is a financial crisis and that erupted in many developed economies simultaneously (www.tcmb.gov.tr). There were other reasons that had triggered the global financial crisis underlying those two main reasons. The first one was the bursting of the housing bubble. Falling house prices have a major effect on household wealth, spending and defaults on loans held by institutions. Events in the U.S. typify a global phenomenon. From 2000 to 2006, house prices in some areas doubled and then subsequently collapsed. While house prices were rising so strongly, credit was supplied liberally to meet the demand as perceptions of risk fell. The rising wealth boosted confidence and spending (Mckibbin and Stockel, 2009). Low interest rates and large inflows of foreign funds created easy credit conditions and encouraged debt-financed consumption. Easy credit, and a belief that house prices would continue to appreciate, had encouraged many subprime borrowers to obtain adjustable-rate mortgages. This credit and house price explosion caused a building boom and a surplus of unsold homes. As the number of unsold houses increased, the U.S. houses prices begin declining in mid-2006. The decline in mortgage payments also reduced the value of mortgage-backed securities, which eroded the net worth and financial health of banks. This vicious cycle was at the heart of the crisis (www.wikipedia.org). The second reason, even though the U.S. had low and sometimes negative savings rates, there was a ―global savings glut‖ coming from the savings of China, Japan, the Middle East, and Europe. It is widely believed that one of the driving forces of over lending and reckless investment in the U.S. housing market came from the global imbalance in savings and investment. The Asian financial crisis occurred in 1997 after some Asian nations suffered seriously from slumping exchange rates because of a lack of foreign reserve. Many of the emerging countries started to save their money in foreign reserves, particularly U.S. dollars. This global saving mainly from China, Japan, Russia, Taiwan, India, Brazil and other oil-exporting countries, was used to buy U.S. Treasury bonds and other U.S. securities. The global imbalance reflected the chronic shortage of savings relative to investment in the U.S. and other developed countries, but the substantial savings surplus to investment in emerging countries (Yu et al., 2009). The third cause was the creative financial intermediation made possible by innovative, but complex, mortgage securities. These securities were sold globally under a lax financial regulatory system with the promise of stable and generous long-term returns (Yu et al., 2009). Along with the rise of unregulated lenders came a rise in the kinds of subprime loans that economists say have sounded an alarm. The large number of adjustable rate mortgages, interest-only mortgages and ―stated income‖ loans are an example of this thinking. ―Stated income‖ loans, also called ―no doc‖ loans and, sarcastically, ―liar loans,‖ are a subset of Alt-A loans. The borrower does not have to provide documentation to substantiate the income stated on the application to finance home purchases. Such loans should have raised concerns about the quality of the loans if interest rates increased or the borrower became unable to pay the mortgage (Bianco, 2008). The causes of global financial crisis are summarized in G-20 Financial Markets and World Economy Conference Declaration. These developments, together, contributed to excesses and ultimately resulted in severe market disruption: During a period of strong global growth, growing capital flows, and prolonged stability earlier this decade, market participants sought higher yields without an adequate appreciation of the risks and failed to exercise proper due diligence. At the same time, weak underwriting standards, unsound risk management practices, increasingly complex and opaque financial products, and consequent excessive leverage combined to create vulnerabilities in the system. Policy-makers, regulators and supervisors, in some advanced countries, did not adequately appreciate and address the risks building up in financial markets, keep pace with financial innovation, or take into account the systemic ramifications of domestic regulatory actions. Major underlying factors to the current situation were, among others, inconsistent and insufficiently coordinated macroeconomic policies, inadequate structural reforms, which led to unsustainable global macroeconomic outcomes. There are long-term and short-term consequences of this global financial crisis. Slower global growth was one of the dramatic results of the crisis. Global growth stood at 5 percent in 2007, but IMF expects world growth to 713 �2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo slow to 3 percent in 2009. Some countries experienced economic contraction after the crisis. In G7 countries except for the United States and Canada, GDP growth was slower in Q2 of 2008 compared to Q1. Three major European economies (Italy, France and Germany) experienced negative GDP growth in Q2, and forecasts are for a continued decline in Q3. The IMF forecasts around 0 percent growth for advanced economies in 2009, and the Federal Reserve Bank of San Francisco said that the U.S. economy will face a sharp slowdown in the final quarter of 2008 and a small contraction in the first quarter of 2009. The crisis caused financing challenges for governments. There is some risk that governments may not be able to guarantee the stability of the financial system, as it has become clear in the case of Iceland, where the banking sector has assets of around 300% of GDP, something no government could ever guarantee, at least not on a short-term basis. Other crucial consequence of the crisis was the rising unemployment. The IMF also predicts that unemployment in the advanced economies will rise from 5.7 percent in 2008 to 6.5 percent in 2009. As economic growth slows, some sectors, including construction and real estate services, are likely to experience disproportionate employment declines. Significant job losses in the financial sector of the industrialized nations are also likely. Since its employment peak in December 2006, the U.S. financial industry has lost 172,000 jobs. In September 2008 alone, the U.S. lost 17,000 financial jobs, representing 10.6% of total employment losses that month. The financial sector employment in Europe exhibits similar downward trends. Another result was the decreasing trade volume. According to the IMF, the forecast for world trade volume growth (in terms of goods and services) has been revised downwards by 1.9 percentage points to reach 4.1% in 2009, with a likely impact on labor markets in developing and emerging economies. A drop in exports, as well as capital inflow, may trigger a falloff in investments. Deceleration of growth and deteriorating financing conditions may trigger further business failures and possibly more banking emergencies – the result being that some countries may slip toward a balance of payment crisis (Khatiwada and McGirr, 2009). The Effects of the Global Financial Crisis on Turkish Economy Turkish economy has high level of integration with world economy through trade and financing channels. So the contagion of the Turkish economy from the crisis is related with this integration. The problems in global credit markets have led to loss of consumer confidence, domestic uncertainties and deterioration in risk perceptions, and so decline in international trade. So, the impact has come mainly through two channels: the collapse in external demand has affected Turkey‘s key exports while subdued domestic lending and capital inflows have depressed domestic demand (Macovei, 2009). The effects of the crisis have been significantly felt after the second quarter of the 2008 when economic growth rate started to decline in Turkey. As a result, Turkish economy grew by only 0.9 percent in 2008, while the growth rate was 4.7 percent in 2007. As the global uncertainties intensified at the beginning of 2009, the slowdown of the economy deepened. The GDP contracted by 14.3 percent in the first quarter of 2009. However, with positive effects of fiscal stimulus packages the slowdown of the economy moderated in the second quarter. As a result, Turkish economy contracted by 10.6 in the first half of 2009. The unemployment rate, which was 10.3 percent in September 2008, increased to 16.1 percent in February 2009. Partly due to the effect of the tax reductions implemented in certain sectors, the unemployment rate began to fall and realized at 13 percent in June 2009. Consumer inflation declined to 5.3 percent as of August 2009. It is expected to be around 5 percent at the end of the year. The Central Bank short-term interest rates decreased to 7.25 percent, down by 10.5 percentage points compared with the last quarter of 2008. Market interest rates also decreased in line with the interest rate policy of the Central Bank (www.tbb.org.tr). Both external and internal demand decreased, and so output and income declined. External financing became limited. The unemployment rate increased. On the other hand, interest and inflation rates have decreased (Tab. 1). GDP (YTL/TL) Real GDP Growth Inflation Unemployment Rate The Central Bank Short-Term Interest Rates Dec.2002 275.032 6.2 29.7 10.3 Dec.2003 356.680 5.3 18.4 10.5 Dec.2004 430.511 9.4 9.3 10.3 Dec.2005 486.401 8.4 7.7 10.3 Dec.2006 575.784 6.89 9.7 8.8 Dec. 2007 856.387 4.67 8.4 10.6 Dec. 2008 950.144 -1.1 10.1 13.6 Nov. 2009 700.958 -6.5 6.53 13.0 44 26 18.0 13.5 17.5 15.75 15.0 6.5 Table 1: Selected Economic Variables (percentage) Source: TURKSTAT 714 �2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo Foreign direct investment came into Turkey has also adversely been affected by this crisis. The liquidity crunch which has been triggered by the crisis eventually led to a downward trend in foreign direct investments. According to UNCTAD (United Nations Conference on Trade and Development), FDI inflows declined by 15 percent according to preliminary figures of 2008. According to UNCTAD data, investment inflows into developed countries dropped 32.7 percent, while inflows into developing countries increased by 3.6 percent. In the first ten months of 2009, FDI inflows to Turkey have reached to 6.622 billion USD. In parallel to the decline in global FDI inflows in 2008, FDI inflows declined by 18 percent in Turkey and received a total of 18 billion USD. The decline in FDI inflows to Turkey are reflecting the global downward trend (Fig. 1). Figure 1: FDI (Foreign Direct Inflows) to Turkey (2002-2009) Source: www.treasury.gov.tr The effects of the crisis on Turkish economy can be classified as effects on real economy, effects on financial markets, and effects on banking sector. The Impact on Real Economy Global financial economic crisis has a significant negative impact on the real economy of Turkey. The negative effects of the global crisis on Turkey‘s real economy have become highly evident in the last quarter of 2008 and in the first quarter 2009. The real sector has been impacted through two main channels: external demand has shrunk significantly since October 2008, and domestic demand has contracted in tandem with deteriorating business prospects and lending conditions (Macovei, 2009). The index of industrial production has declined sharply since August 2008. Industrial capacity in this global financial crisis has decreased more than it decreased in 2001 financial crisis. Manufacturing industry is an important part of Turkish economy. It creates employment and export opportunities. More specifically, about 4.5 million work force is employed and about 95% export of export generated in the manufacturing industry. Due to the economic crisis, the manufacturing production declined (Çiçek and Hatırlı, 2009). Several industries, in particular car industry, were highly sensitive to a drop in external demand, mainly that originating from the European Union countries. Annual decline in the automotive sector doubled the rate recorded in the 2001 crisis. In the 2001 crisis, the lowest level attained by the drop in the capacity utilization rate was 68.5% in April 2001, whereas in the current crisis, the capacity utilization rate sank to 63.8% in both January and February 2009 in the automotive industry. Production in the automotive sector contracted on average by almost 30% annually in the second half of 2009 (Tab. 2). The machinery and textiles sectors are also contracted by around 24% and 20%, respectively in 2008 (Tab. 3 and Tab. 4). 715 �2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo 2004 2005 2006 2007 2008 2008 (11 months) 2009 (11 months) Change (%) 20082009 Production (Thousand) Export (Thousand) 864 916 1.026 1.133 1.147 1.108 775 -30 519 561 706 830 910 873 560 -35 Exp./Production (%) 60 61 69 73 79 79 72 - Table 2: Production and Export of Automotive Industry Source: OSD Dec.2006 107.8 107.7 100.1 113.8 110.0 Dec. 2007 115.3 114.8 102.9 120.9 126.7 Dec. 2008 114.3 112.7 91.4 115 133.9 Oct. 2009 117.9 116.7 93.2 114.2 109 Total Industry Manufacturing Textile Machinery Transportation Equipment Table 3: Industrial Production Indexes (2005=100.0) Dec.2006 Dec. 2007 -1.9 -2.6 -10.9 -16 13.6 Dec. 2008 -17.8 -20.1 -22.0 -14.8 -40.0 Oct. 2009 6.5 6.6 4.9 9.4 -4.6 Total Industry 2.6 Manufacturing 1.6 -5.0 Textile 17.8 Machinery Transportation 10.0 Equipment Table 4: Percentage Change of Monthly Industrial Production Index over to the Same Month of the Previous Year (2005=100.0) Source: TURKSTAT World trade contracted 9.8 percent in the last quarter of 2008 and 31.9 percent in the first half of 2009 (Fig. 2). The annual volume of external trade was USD 348 billion as of September 2008 and dropped to USD 258 billion as of June 2009. Decline in exports has been significant in the current crisis whereas in the previous one they were less affected. This result is as expected. Because in the last crisis the whole world is in recession. Figure 2: Export levels of the World and Turkey Source: http://www.istanbul2009turkey.org/istanbul2009/Turkey/Turkish%20Economy.pdf Together with the weakening in oil and commodity prices and decline in exports of technology intensive sectors with higher dependency, imports has also been declining since October 2008 (Fig. 3). 716 �2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo Figure 3: Exports and Imports Source: http://www.istanbul2009turkey.org/istanbul2009/Turkey/Turkish%20Economy.pdf Export (YTL/TL) Import (YTL/TL) Dec.2002 54.622 78.390 Dec.2003 70.370 103.425 Dec.2004 90.327 139.677 Dec.2005 99.039 157.381 Dec.2006 123.342 201.078 Dec. 2007 139.340 221.029 Dec. 2008 170.513 258.691 Nov. 2009 130.143 175.654 Table 5: Exports and Import of Turkey Source: TURKSTAT As a result, world trade volume and global economic activity has weakened substantially because of the global financial turmoil especially since the third quarter of 2008. Parallel to this development, Turkey‘s exports has been declining since October 2008 due to the significant slowdown in her major trading partners, especially in the European Union (EU). The increase in trade volume with African nations turned out to be a factor that restricted the further fall in exports (www.istanbul2009turkey.org). The Impact on Financial Markets The Turkish currency and financial markets came under significant pressure from the turmoil in global markets that broke out in July 2007 and subsequent decline in risk appetite for emerging market investments. The Istanbul Stock Exchange lost about 55% of its value from July 2007 until March 2009, when a rebound started. Between March and June 2009, the stock exchange regained some ground, but remained around 30% below the July 2007 value (Fig. 4). Figure 4: Price Indices ISE National-100, According to Closing Price Source: www.tcmb.gov.tr 717 �2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo Turkish Lira has been in a strengthening period after 2002. The Lira became more volatile during the subprime credit crunch, but did not depreciate strongly until October-November 2008- after Lehman Brothers collapsed. So, international financial crisis put upward pressure on the exchange rate and TL depreciated. From October 2008 until March 2009, the lira lost around 25% of its value against Euro, but has since regained about 10% (Macvoeli, 2009). The Lira also lost about 20% of its value against US Dollar from September 2008 to June 2009. The Impact on Banking Sector In Turkey, the financial sector is yet at the stage of growth. It is small and shallow when compared with the financial sectors of developed countries. It is estimated that the ratio of financial assets, consisting of bank assets, shares and public and private borrowing instruments, to GDP was 150 percent for Turkey, 246 percent for developing countries and 421 percent for the world in 2007. The banking system has a major share in the financial sector (www.tbb.org.tr). After the 2001 financial crisis, a restructuring program was applied in the banking sector. Bankrupt banks were closed, taken over or merged with other banks after the 2001 crisis. Risk management systems improved and public supervision became more effective in this period. Banking Regulation and Supervision Agency fulfilled its regulation and supervision responsibilities very well in 2000s. The banking sector has showed a rapid growth performance after this program. The total assets rose from USD 130 billion to USD 465 billion, their ratio to GDP from 57 percent to 77 percent. In this period, the financial structure of the sector also became stronger. The shareholders‘ equity of the sector also became stronger. The shareholders‘ equity of the sector increased from USD 16 billion to USD 54 billion and its free equity from USD 3 billion to USD 40 billion (www.tbb.org.tr). As a result of success of ―Banking Restructuring Program‖ and change in the risk management conception Turkish Banking Sector seemed well positioned to weather the global financial crisis, the opposite of the situation in the EU and the US where the crisis was first triggered by the financial turmoil. Financial sector as a whole and banking sector grew faster than the general economy in 2008. Total assets of Turkish financial sector and banking sector grew 23% and 26%, respectively. Total assets of Turkish financial sector and banking sector reached to 945.4 billion Turkish Liras (TL) in 2008 (Bastı, 2009). Performance indicators of the banking sector were also generally positive in 2008. Capital adequacy ratio of the sector is above the legal limits. There is small deterioration in solvency and leverage ratios, but debt repayment capacity of the banking sector seems still healthy. Profitability of the banking sector is still very high by the end of 2008 (Bastı, 2009). The Economic Austerity Measures of Turkey against the Global Financial Crisis The authorities and organizations adopted a series of measures to lessen the effects of the global financial crisis on their own countries, and also in Turkey. Those anti-crisis measures adopted by the authorities initially on the monetary side and subsequently became more pronounced in the fiscal policy area. This was broadly in line with the crisis response packages adopted internationally, while taking into account the particularities of Turkey‘s macroeconomic framework in terms of available room for counter-cyclical measures. The Central Bank, Banking Regulation and Supervision Agency, and Turkish Government have taken some austerity measures against global financial crisis to protect Turkey from the negative effects of the global financial crisis. Central Bank Measures against the Global Financial Crisis Problems in the international credit markets have heightened since the second half of September due to increased concerns over the credibility of the financial system, thus leading to liquidity problems in many countries. During this period, the Central Bank adopted the following regulations in order to ensure the efficient functioning of the foreign exchange market and to strengthen foreign exchange liquidity in the banking system in case of liquidity problems (www.tcmb.gov.tr ): Central Bank declared that it will resume its activities as an intermediary in the Foreign Exchange Deposit Market until the removal of uncertainties in international markets since 9 October 2008. Central Bank increased its transaction limits in the Foreign Exchange Deposit Market by twofold to USD 10.8 billion since 23October 2008. Central Bank extended lending maturity to one month from one week in the Foreign Exchange Deposit Market since 21 November 2008. It adopted a strategy to use foreign exchange reserves to primarily support the foreign exchange liquidity need of the banking system. The reserve requirement ratio was unchanged at 6 percent in liabilities, but it was lowered to 9 percent from 11 percent in foreign exchange liabilities 718 �2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo since 28 November 2008. With this measure, the Central Bank provided an additional liquidity of USD 2.5 billion to the banking system. The Central Bank Regulation on the Liquidity Support Facility governing the principles and procedures set forth for the utilization of credit facilities as stipulated in subparagraph (c) of the (I) of Article 40 of the Central Bank Law was published. Accordingly, the loans will be available (www.tbb.org.tr):  as advance payments, with one month maturities for a maximum of one year period,  at the lending rate set for the intraday transactions carried out at the Interbank Money Market; bearing in mind the principle that interest rates applicable to credits of this nature are higher than those applicable to normal open market transactions of the central banks,  against collaterals accepted at the Interbank Money Market,  being limited to the amount twice as much as the equity capital of the applying bank. In the last quarter of 2008, global financial conditions have been tighter than required by the stance of monetary policy, owing mainly to the intensification of the global financial crisis. Turkey has also been undergoing a similar process. In this context, the Central Bank recently made a measured cut in short-term interest rates, in order to offset the extra tightening in monetary conditions (www.tcmb.gov.tr). Because of the fluctuations due to decrease in the depth of foreign exchange market, the Central Bank has decided to inject foreign exchange liquidity into the market in March 10, 2009 through pre-announced foreign exchange selling auctions under the basic principles of floating exchange rate regime. Daily amount of foreign exchange to be sold via auctions has been set as USD 50 million. Until April 2009, when the auctions were postponed, the amount sold through auctions reached USD 900 million. The Central Bank has started foreign exchange buying auctions in order to increase foreign exchange reserves and the amount bought through the auctions reached to 1.3 billion dollar as of September 15 2009 (www.istanbul2009turkey.org). The Central Bank cut its interest rates and extended the maturity in foreign exchange deposit market in order to prevent a possible foreign exchange squeeze in the financial market. Accordingly, lending rate was reduced to 5.5 percent from 7.0 percent for USD, and to 6.5 percent from 9.0 percent for Euro. The maturity of interbank transactions was extended to 3 months from 1 month (www.tbb.org.tr). Central Bank increased the exports rediscount credit limit by USD 500 million to USD 1 billion in order to contain the effects of the global financial crisis on industry sectors. Additionally, the rules and principles applicable to the exports rediscount loan limit were rearranged for rendering the use of these loans easier. Therefore, the condition that sets forth assignment of the reserves for letters of credit to the Central Bank was repealed (Erdönmez, 2009). The Banking Regulation and Supervision (BRSA) Measures against the Global Financial Crisis The Banking Regulation and Supervision (BRSA) adopted certain measures aimed at preserving the financial strength of banks and containing the effects of abrupt changes in the financial asset prices on banks‘ capital adequacies. BRSA required banks to get permission for distribution of the 2008 earnings and to protect the balance sheets of the banks from the last interest rate increase BRSA made a new arrangement. BRSA allowed banks to reclassify the securities in their balance sheet from trading portfolio to investment portfolio for once only. BRSA allowed banks to restructure the loans apparently posing no problems in order to ensure smooth functioning of the loan relations between banks and non-financial institutions (www.tbb.org.tr). The Government Measures against the Global Financial Crisis To mitigate the adverse effects of global financial crisis on the Turkish Economy the Government has taken various measures. Credit subsidies have been provided to the real sector with special focus on small and medium enterprises and also exporters, guarantee and credit limits of Eximbank were increased, value added tax and special consumption tax on many products such as automobile, furniture, home appliances and residential estates were reduced temporarily, withholding tax on stocks for local investors was removed, the amount of short-term working allowance was increased and its duration was lengthened, unemployment insurance payments were amplified, infrastructure expenditures to the Southeastern Anatolia Project were increased, transfer payments to local governments were increased, incentives on income tax, energy supports, and social security premiums were extended for one year, a new employment package was prepared, a new incentive system was prepared to support investments taking sectoral and regional priorities into consideration, loan guarantee application for small and medium enterprises (SMEs) were enhanced, regulations for reconstructing cumulative credit card debts were put into practice (www.treasury.gov.tr). 719 �2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo The Government sought authorization from the Parliament for increasing and determining for a period of two years the deposit insurance coverage, which was TL 50,000. This amendment allowed for the Treasury‘s direct guarantee on the deposits insured as the Savings Deposit Insurance Fund‘s (SDIF) own resources would not be sufficient to cover an unlimited insurance on deposits for which the SDIF was authorized under the current law. Additionally, the Finance Ministry introduced tax advantages for sectors. Accordingly, payment of the tax dues which became payable before 1 September 2008 was decided to be deferred to December 2008 and with 18 installments (www.tbb.org.tr). With a law, called Asset Peace Law, the real and legal person owing money, foreign exchange, stocks and other precious assets abroad as of 1 October 2008 allowed to bring them and register those precious assets in Turkey by paying two percent tax. Similarly, it was also decided that current income and corporate taxpayers should be able to register their existing securities and real properties inside Turkey which were not registered as of 1 October 2008 through payment of five percent tax (Erdönmez, 2009). ―The Law No. 5834 About Omission of the Past Records for Unpaid Checks and Protested Promissory Notes, and Credit and Credit Card Debts‖, known as the law for the amnesty records allowed the deletion of the real and legal persons‘ past records kept at the Central Bank for their unpaid checks, protested promissory notes, and credit debts ensuring that such sums are totally paid before or within 6 months after its effective date or restructured and totally paid. The Government introduced a new economic austerity package for companies, employees, and retired people as a law. With this law, the short term employment fund implemented over Unemployment Fund was extended to 6 months from 3 months. The amount of compensation was increased by 50 percent. According to this law the retirement wages could never be seized (Erdönmez, 2009). The Government also announced other measures in order to ease the effects of the global financial crisis on 13 March 2009. Accordingly, it was adopted that (www.tbb.org.tr):  consumption tax applied to durable goods and automobiles to be lowered for a period of 3 months,  value added tax (VAT) applied to real estates to be lowered to 8 percent from 18 percent for a period of 3 months,  an additional subsidy of TL 75 million to be extended to SMEs,  resource utilization support fund to be cut by 5 percentage points,  capital of Eximbank to be increased,  discounted night tariff for pricing the use off electricity in industry sector that applied to weekdays only to be extended to cover also weekends and other public holidays,  Special Communication Tax of cable, wireless, and mobile internet service is decreased from 15 percent to 5 percent,  For 1979 and old model of automobiles which will be written off remission of tax is enabled,  To encourage the merger of SMEs the Government adopted a tax measure. SMEs which merge with other SMEs until 31 December 2009 will be exempted from corporate tax or pay reduced corporate tax down to 7.5%.  To accelerate domestic demand the Government extended the Private Consumption Tax from 15 June 2009 to 30 September 2009. Conclusion The world faced a serious crisis for the first time after the ―Great Depression‖ which started in U.S. and has spread all over the countries in a short time. Turkey has also been affected by this crisis. Foreign direct investment inflows, export, domestic demand, and industrial production have declined, while the unemployment rate and inflation rate have increased. Foreign exchange rate has been also affected dramatically. Lira has lost value against Euro and US Dollar. To mitigate those adverse effects of global financial crisis on the Turkish Economy, the Government, the Central Bank, and Banking Regulation and Supervision Agency have taken various measures. Some of the measures taken in order to cushion negative impacts of global crisis to the national economy have been successful, some of them expected to be effective in the forthcoming periods. A pick up in Turkish economy is expected parallel to the recovery of the world economy. In fact, the economical figures show that Turkey is more resilient to both domestic and external shocks than her previous crisis experiences. The pressures on the exchange rate have not affected banking sector and currency so much. The banking sector has remained healthy and profitable; despite the main source of the global financial crisis was financial sector. Foreign direct investment has declined but continued to flow into the country at moderate levels. Istanbul Stock Exchange has lost value, after a while it has started to regain its value. It can be concluded that the performance of Turkish economy under such a serious crisis validates the success of Turkey‘s past restructurings. 720 �2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo On the other side, the dramatic rise in unemployment rate and the sharper than expected decline in economic activity show that there are still some vulnerabilities of Turkish economy. According to many analysts the negative effects of the current crisis will remain awhile because of the weak external environment, low levels of external and domestic demand, and shrinkage of the foreign capital inflows. The recession has stroked the bottom in the first quarter of 2009. In the rest of the year the economy has started to rally by force of tax incentives which have provided increase in domestic demand. At this juncture, policymakers should aim to sustain the improvement in investor confidence and to decrease the unemployment rate. Structural reforms boosting the small and medium enterprises (SMEs) and so the competitiveness of the business sector would help improve the performance of the economy in the upturn. As for the Turkish economy‘s future prospects, the increase in GDP between 2002 and 2007 shows that Turkey has an apparent growth potential. With her growth potential, young population, diverse and qualified workforce, entrepreneurial spirit, Turkey is a crucial potential market for global investors. Its strategic location between Europe and Asia give her an important role in this area and makes it a relatively attractive business location. The last developments demonstrate that some of the problems of Turkish economy have been solved, but there are still remaining problems which are waiting to be solved. So, Turkey has to continue to make restructurings and reforms to achieve its expected growth potential. References Ataman Erdönmez, P. (2009). Küresel kriz ve ülkeler tarafından alınan önlemler kronolojisi. Bankacılar Dergisi, 68, 85-101. Bastı, E. (2009). 2008 Global financial crisis and the Turkish financial system. C.U. Sosyal Bilimler Enstitüsü Dergisi, 18 (2), 89103. Bianco, K. M. (2008). The subprime lending crisis: Causes and effects of the mortgage meltdown. CCH Mortgage Compliance Guide and Bank Digest, 10 Dec 2009. < http://business.cch.com/bankingfinance/focus/news/Subprime_WP_rev.pdf >. Khatiwada, S., & Emily, M. (2009). Current financial crisis: A review of some of the consequences, policy actions, and recent trends. International Institute for Labour Studies, 02 Dec 2009. < http://www.scribd.com/doc/7882284/Current-Financial-Crisis-aReview-of-Some-of- >. Macovei, M. (2009). Growth and economic crises in Turkey: Leaving behind a turbulent past?. European Economy, 1 Dec 2009. < http://ec.europa.eu/economy_finance/publications/publication16004_en.pdf >. McKibbin, W. J., & Andrew S. (2009). The global financial crisis: Causes and consequences. Working Papers in International Economics, 05 Dec 2009. <http://www.melbourneinstitute.com/conf2009/Presentations/Session%205/McKibbin_Stoeckel_Session_5.pdf >. Uğur, Ç., & Hatırlı S. A. (2009). Küresel ekonomik krizin Türkiye imalat sanayine etkileri. Suleyman Demirel University, 15 Dec 2009. < http://idc.sdu.edu.tr/tammetinler/kalkinma/kalkinma35.pdf >. Yu, W. C., David, W. K., & Tessema, M. (2009). The great destruction: Causes of the global financial crisis in 2008. Winona State University, 1Dec 2009. < http://course1.winona.edu/wyu/research/p13.pdf >. UNCTAD. (2009). Assessing the impact of the current financial and economic crisis on global FDI flows. 01 Dec 2009. <http://www.unctad.org/en/docs/webdiaeia20091_en.pdf >. Wikipedia. (2009). Subprime mortgage crisis, 10 Nov 2009. <http://en.wikipedia.org/wiki/Subprime_mortgage_crisis>. G20 Declaration. (2008). Summit on financial markets and world economy. 15 Nov 2009. <http://www.bond.org.uk/data/files/g20_declaration_15_nov_summit.pdf >. The Banks Association of Turkey. (2009). The Financial System and Banking Sector in Turkey. 1 Dec 2009.<http://www.tbb.org.tr/Dosyalar/Arastirma_ve_Raporlar/The_Financial_System_and_Banking_Sector_in_Turkey.pdf >. Istanbul2009Turkey. Turkish economy. 10 Dec 2009. <http://www.istanbul2009turkey.org/istanbul2009/Turkey/Turkish%20Economy.pdf >. 721 �2nd International Symposium on Sustainable Development, June 8-9 2010, Sarajevo TCMB. (2008). 2009 Yılında para ve kur politikası. Nov 2009. <http://www.tcmb.gov.tr/yeni/duyuru/2008/Baskan_ParaPol09.pdf>. www.osd.org.tr www.tbb.org.tr www.treasury.gov.tr www.turkstat.gov.tr www.tcmb.gov.tr www.unctad.org 722 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 215 Title A name given to the resource Global Financial Crisis: Economic Austerity Measures Of Turkey Author Author KILIÇ, Merve Abstract A summary of the resource. The global financial crisis has been the worst financial crisis since the one related to the Great Depression of the 1930s. It contributed to widespread business contraction, increases in unemployment, shrinking government revenues, declines in consumer wealth, and so a significant decline in economic activity. Many causes have been cited about the global financial crisis by leading economists and experts. Both market-based and regulatory solutions have been presented to lessen the dramatic effects of the crisis. The collapse of a housing bubble, which peaked in the United States in 2006, erupted in 2007 and led to a global financial crisis in 2008. This crisis has been triggered by a dramatic rise in mortgage delinquencies and foreclosures in the U.S. and has caused the values of securities tied to housing prices. So it has damaged financial institutions all over the world. The financial crisis which began in industrialized countries quickly spread to emerging and developing economies. Questions about bank liquidity, declines in credit availability, and damaged investor confidence had a negative impact on global markets, and caused large losses during 2008. This global crisis also affected Turkey. But the effects of this crisis on Turkey were limited. Demand in global and national markets has decreased. So the trade level in both national and global markets has also decreased. Bank‘s liquidity and profitability seemed healthy during such a crucial crisis. There were several policies of Turkish Government to diminish the effects of financial crisis about interest rates, tax rates, exports rediscount credit limit etc. This study aims to analyze the effects of the global financial crisis and the measures taken by Turkey to lessen the negative effects of it on Turkish economy. Date A point or period of time associated with an event in the lifecycle of the resource 2010-06 Keywords Keywords. Conference or Workshop Item PeerReviewed HB Economic Theory Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 869 Title A name given to the resource Global Simulation of a Global Understanding Course: Developing language competence and raising cultural awareness Author Author Trajanoska , Ivana Jovancevska-Milenkovska , Jovanka Klisarovska, Elena Abstract A summary of the resource. This paper aims at presenting how a Global Understanding course syllabus can be used in an EFL classroom using the Global Simulation Method. The Global Understanding course has been offered to students from different faculties at the University American College Skopje, Macedonia in collaboration with the East Carolina University, USA and other partner Universities from countries all around the world. The course fosters global understanding and intercultural communication through direct contact with students from different Universities from various countries. Students communicate with their colleagues through chat session and conference links, and discuss previously assigned topics dealing with college and family life, educational system in their country, personal plans for their future, traditions, customs, food, holidays, celebrations, religion, the meaning of life. Students write diary entries on their sessions, create joint papers on a chosen subject matter with their partner student, give Power Point presentations, and do quizzes on the partner country facts. The objective is becoming more intercultural, being able to collaborate with people from different culture than your own, shattering prejudice and stereotypes, and diminishing ethnocentrism. In this paper we would like to suggest ways how to adapt the GU course syllabus for TEFL purposes through the Global Simulation Method developing language skills in an interactive and playful atmosphere. The Global Simulation Method is a communicative approach to language learning which has not been exhaustively explored in the EFL classroom compared to its popularity in the FLE classroom. However, it enables the students to develop language competences in a motivating, true-to-life atmosphere, where they become active participants of the learning process. The global simulation of the GU course gives the students the opportunity to work on their speaking, writing, and listening skills, learn language in context and through practical usage, become more independent learners, and raise their cultural awareness. Date A point or period of time associated with an event in the lifecycle of the resource 2012-05 Keywords Keywords. Conference or Workshop Item PeerReviewed P Philology. Linguistics https://omeka.ibu.edu.ba/files/original/4774009235f838f081b0b522b7de0780.docx fb81473f592e6cb2a72542b75a21ea25 https://omeka.ibu.edu.ba/files/original/9c3121deb7c9c1ecc2419c34061d81f7.pdf 0d98cc2ac1f7a702133f634fd0b94e55 PDF Text Text Global Water Issues and Changes in Water Resources Management Policies Ömer Faruk Bilbay Mustafa Kemal University Turkey bilbay1987@hotmail.com Veysel Eren Mustafa Kemal University Turkey bilbay1987@hotmail.com Yakup Bulut Mustafa Kemal University Turkey bilbay1987@hotmail.com Abstract: Water is a very important natural resource for both sustain of universe and whole live life. Water has maintained its importance throughout history and it had played effective role on emerging and developing of many civilizations. Today, such a fast growing world population, global warming, decreasing of water resources, high cost of alternative fresh water, unconsciously and primitive farming irrigation, wasting urbanization which out of order, water pollution because of industry waste and another problems has been emerged. This situation has made water resources management as an international discussion both aspect of politic and economic. Deficiencies in the amount and quality of water have been considered to be a threat both people and live species. . Therefore, nowadays the basis of the sustainability of water resources has become more important and necessity. In addition to national and international actors nongovernmental organizations take on an important role in this regard the importance of the future path of the water with carrying out the support of the financial incentive, conferences, decisions, projects and they have demonstrated that how fresh resources water will be very important for the future of life. In this study we will examine reason of global water problems, sustainable water resources management, the transformations and changes in water resources policies and give advices about solution. Keywords: Water Resources, Water Politics, Water Problems, Sustainability, Water Management, Global Warming. 151 �151 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 2612 Title A name given to the resource Global Water Issues and Changes in Water Resources Management Policies Author Author BILBAY, Omer Faruk EREN, Veysel BULUT, Yakup Abstract A summary of the resource. Water is a very important natural resource for both sustain of universe and whole live life. Water has maintained its importance throughout history and it had played effective role on emerging and developing of many civilizations. Today, such a fast growing world population, global warming, decreasing of water resources, high cost of alternative fresh water, unconsciously and primitive farming irrigation, wasting urbanization which out of order, water pollution because of industry waste and another problems has been emerged. This situation has made water resources management as an international discussion both aspect of politic and economic. Deficiencies in the amount and quality of water have been considered to be a threat both people and live species. . Therefore, nowadays the basis of the sustainability of water resources has become more important and necessity. In addition to national and international actors non-governmental organizations take on an important role in this regard the importance of the future path of the water with carrying out the support of the financial incentive, conferences, decisions, projects and they have demonstrated that how fresh resources water will be very important for the future of life. In this study we will examine reason of global water problems, sustainable water resources management, the transformations and changes in water resources policies and give advices about solution. Keywords: Water Resources, Water Politics, Water Problems, Sustainability, Water Management, Global Warming. Publisher An entity responsible for making the resource available International Burch University Date A point or period of time associated with an event in the lifecycle of the resource 2014-04 Keywords Keywords. Article PeerReviewed Identifier An unambiguous reference to the resource within a given context ISSN 2303-4564 H Social Sciences (General) https://omeka.ibu.edu.ba/files/original/375ffb0309ce0b46d869cce280f6d5a8.docx f0b2e1ba18f5a70837c86af93b537b0c https://omeka.ibu.edu.ba/files/original/f40f64698fdfae0897bf795534e3690f.pdf f3beb54363748f1486609054a55a2f5f PDF Text Text Globalization and Albanian Civil Society during the Democratic Transition SalihOzcan Epoka University Albania sozcan@epoka.edu.al Gilda Hoxha Epoka University Albania gildahoxha@gmail.com Abstract: This paper is part of a research on Albanian society after 1990. This study will attempt to explain and analyses the effect of globalization on the democratization process of Albania. Within this framework this paper will focus mainly on to identify the role of civil society on political behavior in Albanian case. To achieve this goal, the principal aims are to examine how civil society in Albania is involved during the „democratic transition‟ after the fall of communism and the civil movements' influence on political behavior.In order to analyze the relationship between the concept of “civil society” and “democratization process” in Albania, it will be studied, among others, from two perspectives: a- in terms of national, political and social context that formed the movement's goals and strategies in terms of becoming influential on the decision-making process of government through the protests in Albania. Secondly the features of Albanian civil society will be treated in this paper, based on the debate: “How globalization has influenced the philosophy and organization of civil society? This debate will compare with the cases in the neighboring countries in the Balkan region. In theory, one of the main functions of civil society is to play an important and „tutoring‟ role in the process of building a democratic society. Analyzing civil society in Albania requires looking at the way how civil society works and interacts with various financial, human and technical factors. This paper will be based on qualitative method. For analytic purposes, the discussion is organized in two main parts. The first part, examines theoretical part and focusing on the key issues that relate and link the government and NGOs in decision making process and political behavior of Albanian civil society. The second part examines existing Albanian civil society and its outcomes during the 'democratic transition' in reference with the first theoretical part. The paper will conclude with predicting the future of civil society in Albania. Keywords: Globalization, Civil Society, Protest, Political behavior, Albania. 30 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 2460 Title A name given to the resource Globalization and Albanian Civil Society during the Democratic Transition Author Author OZCAN, Salih HOXHA, Gilda Abstract A summary of the resource. This paper is part of a research on Albanian society after 1990. This study will attempt to explain and analyses the effect of globalization on the democratization process of Albania. Within this framework this paper will focus mainly on to identify the role of civil society on political behavior in Albanian case. To achieve this goal, the principal aims are to examine how civil society in Albania is involved during the ‘democratic transition’ after the fall of communism and the civil movements' influence on political behavior.In order to analyze the relationship between the concept of “civil society” and “democratization process” in Albania, it will be studied, among others, from two perspectives: a- in terms of national, political and social context that formed the movement's goals and strategies in terms of becoming influential on the decision-making process of government through the protests in Albania. Secondly the features of Albanian civil society will be treated in this paper, based on the debate: “How globalization has influenced the philosophy and organization of civil society? This debate will compare with the cases in the neighboring countries in the Balkan region. In theory, one of the main functions of civil society is to play an important and ‘tutoring’ role in the process of building a democratic society. Analyzing civil society in Albania requires looking at the way how civil society works and interacts with various financial, human and technical factors. This paper will be based on qualitative method. For analytic purposes, the discussion is organized in two main parts. The first part, examines theoretical part and focusing on the key issues that relate and link the government and NGOs in decision making process and political behavior of Albanian civil society. The second part examines existing Albanian civil society and its outcomes during the 'democratic transition' in reference with the first theoretical part. The paper will conclude with predicting the future of civil society in Albania. Keywords: Globalization, Civil Society, Protest, Political behavior, Albania. Publisher An entity responsible for making the resource available International Burch University Date A point or period of time associated with an event in the lifecycle of the resource 2014-04-24 Keywords Keywords. Article PeerReviewed Identifier An unambiguous reference to the resource within a given context ISSN 2303-4564 H Social Sciences (General)