Sampo’s Wahlroos wants to take Turkey into euro before EU membership

Chief executive of Finnish bancassurer writes in Financial Times

Björn Wahlroos

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Björn Wahlroos, CEO of the Finnish bancassurer Sampo Corporation, says that Turkey should be taken into the common European currency, the euro.
      In an article written in the British Financial Times newspaper, Wahlroos says that taking Turkey into the euro would eliminate the risk of a currency crisis, which would bolster the Turkish economy and encourage stable development.
      "Use of the euro would, moreover, become a symbol of progress and allegiance to European values, further strengthening democracy and the rule of law", Wahlroos wrote.
     
Wahlroos’ proposal is radical in that Turkey does not yet meet all of the criteria required of countries joining the common currency, as stated in the stability and growth pact.
      These criteria include slow inflation and balanced state finances.
      "The importance of the criteria has almost completely disappeared, as the European Central Bank and its currency have gained credibility", Wahlroos said by telephone from London.
      In other words, Wahlroos feels that the euro enjoys the same kind of credibility on international monetary and currency markets as the leading currency of exchange, the US dollar.
      For this reason, Wahlroos believes that the EU need not fear for the stability of the euro even if countries like Turkey, whose economies are susceptible to rapid shifts, were to join the euro zone.
      At the same time, he feels that Turkey and the other membership applicants would gain a commodity, which would bring stability to their economies. "It is a risk worth taking. I do not even believe that it would bring much pressure on the euro", Wahlroos says.
     
Olli Rehn, the European Commissioner for Enlargement, takes a more sceptical view of the idea.
      Rehn notes that the euro is based on legally binding agreements, requiring that only members of the EU can join.
      Allowing Turkey to join the treaty would require changes to these treaties.
      Meanwhile, Professor Paul De Grauwe of the Belgian Catholic University of Leuven, an expert in monetary policy of the euro zone, also pointed to this legal obstacle after reading Wahlroos’ article.
     
From a purely economic standpoint De Grauwe also sees problems with such a move.
      While it would undoubtedly increase economic stability in Turkey, he says that it would also put Turkey into an economic "straitjacket".
      This could be a problem for Turkey, because the country’s cyclical trends differ from those of the euro zone.
      "Functioning democracy requires a stable national economy, but it is a bit naive to believe that a magic trick, such as joining the euro, would be enough", De Grauwe says.


Links:
  Financial Times: European Union hopefuls should join the euro first

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