Since our last post was about Greece, balance demands that we ought to say something about her neighbour, and long-time competitor, Turkey.

This huge country has one foot in Europe and one in the Middle East. Despite the fact that 97% of her land is in Asia, the eyes of Turkey’s political and business classes have been looking more and more to the West in recent years. The West has paid her little attention in response. This is a big mistake.

Turkey is a gigantic business opportunity. Her economy has been modernising at a furious rate. The in-flight magazine on Turkish Airlines – which is itself now a very impressive modern operation – is as full of IT gadgets, fashionable leisure items, and new media as its American equivalents. One is met at Istanbul by that ubiquitous symbol of Western “progress”, the Starbucks. Turkish television shows Hollywood films. Young urban Turks are indistinguishable from their counterparts in Western Europe.

Yet Turkey remains a land of dramatic contrasts. Within a few miles of up-market coastal resorts that resemble the South of France there are villages that look unchanged since the zenith of the Ottoman Empire in the 16^th Century. The tourist can feel that he has entered a time warp. SUVs whizz past old ladies who are literally bent double under huge bundles of sticks. Turkey is changing fast, but still has a long way to go – hence the opportunity.

The country’s cosmopolitan leaders have long sought to add membership of the EU to membership of NATO and the G-20 as a symbol of Turkey’s commitment to the modern world. The appetite for this has been diminished a little, but by no means completely, by the eurozone crisis and also by a recent falling out with France. The French passed a law making denial of Turkish massacres of Armenian Christians a criminal offence. That these massacres took place, about a hundred years ago, is a matter of undoubted historical fact, and the Turks really do need to come to terms with this aspect of their history, among others. However, the French law is unlikely to help this process: how can one encourage people to debate a difficult subject by making it illegal to discuss it freely?

The strident reaction of Turks of all shades of opinion to the French law is a useful reminder that, for all its modernising, Turkey retains a political culture very different from that of the Western countries it seeks to emulate. However, this may be to Turkey’s advantage in the medium term. A country semi-detached from the EU – with all the benefits of physical proximity and economic integration, but without the burden associated with eurozone membership – might be the best place to do business for the next few years.

It is a commonplace to say that the world would be better off without politicians. Of course no one really means it – but it may be true in the economic crisis that is now brewing. Our political leaders, far from averting this crisis, are themselves the cause of it.

The same was not true of the 2008 crisis. The politicians were a contributory factor then, but by no means the only one or the most important. The global economy survived that crisis and has been recovering, albeit very slowly, since then. The 2011-12 crisis is a new one and is entirely of the politicians’ own making.

A little local difficulty in Greece has been blown out of all proportion by European politicians’ obsession with maintaining the euro in its current form at all costs. The actual needs of the different national economies of the EU have been put second to keeping countries in the eurozone who should never have joined in the first place.

Leaving aside the question of the desirability of a single currency in theory – there is case for and a case against – the deal cobbled together in a panic by European leaders last week is not a sound basis for such a currency. Although EU leaders are right that tighter enforcement of the rules is essential to any single currency, the new proposals, called “fiscal union” (FU), leave the same holes in the deal that led to the wholly foreseeable collapse of the previous arrangements. The markets are now endorsing the position of the UK, which wanted nothing to do with it.

Meanwhile, the stupidity and egotism of Europe’s leaders seem to have provoked the competitive streak in their American counterparts, who appear determined to prove that they can be just as stupid and egotistical. Everyone is at last agreed that a cut in payroll taxes is a highly desirable stimulus to employment – something this blog has been saying for some time – so one would imagine it would pass without difficulty. Not in Washington...

For purely political reasons, President Obama and his Democratic allies tied the payroll tax cut to an increase in taxes on higher earners, knowing his Republican opponents are pledged to oppose tax increases. Rather than stick to the moral high ground, the Republicans, in their turn, tied their support for the tax cut to funding a controversial pipeline in the worst tradition of American “pork barrel” politics. Given that the Republicans were elected on a platform of cutting both taxes and “pork barrel” expenditure, their making the cut conditional on more expenditure is doubly inexcusable – at least the Democrats are being true to their principles, even if what they are doing in bad for the economy. Both sides have proved themselves selfish, foolish, and dishonest, but in different ways.

Looking at our “leaders” in general, even a law-abiding businessman must wonder if the anarchists may have a point.

So don't think you can fool me with your political tricks
Political right, political left, you can keep your politics
Government is government and all government is force
Left or right, right or left, it takes the same old course
Oppression and restriction, regulation, rule and law
The seizure of that power is all your revolution's for
You romanticise your heroes, quote from Marx and Mao
Well their ideas of freedom are just oppression now

Nothing changed for all the death, that their ideas created
It's just the same fascistic games, but the rules aren't clearly stated
Nothing's really different cos all government's the same
They can call it freedom, but slavery is the game

Extract from 'Bloody Revolutions' by Crass

Just in case our last couple of posts are misinterpreted as another case of impecunious Brits taking jealous pleasure at the impoverishment of our once-wealthy American cousins, let us make it clear that we have a much bigger problem on our own doorstep.

The American problem is that recovery is too slow, but there is still recovery and the worst of the crisis is probably past, at least for the time being. The European Union, on the other hand, has not really addressed its deeper structural problem, and is therefore a crisis waiting to happen.

In fairness, the euro, the common currency of most EU states, is a symptom, rather than the cause, of this problem. There was always a hole in the deal: the euro is only as strong as its weakest economy. In particular, lax fiscal discipline on the part of a single Eurozone government undermines the whole currency. The mechanisms for imposing discipline were weak from the beginning, but everyone ignored them when times were good.

That is no longer an option. The party is over and the bill has just been presented. The EU, however, has even less leadership than the USA. The European response to the inability of overindulged states like Greece, Spain, and Ireland to pay what they owe has been described, elegantly but all too accurately, as “agreeing a funding mechanism but not funding it”.

Nationalised banks in Ireland are bust. This in turn puts pressure on the sovereign debt of the Irish government. Much of that debt forms a key part of the balance sheets of foreign banks – not least in Britain, which may therefore suffer despite the UK not being a Eurozone member.

This could impact on the whole economy. The equity market, still a little too bullish under the circumstances, may be in denial, but the rising price of gold suggests a lot of the smart money is playing it safe in anticipation of another crash.

Meanwhile, across the Atlantic, the Americans have some right to feel smug. The first phase of the infamous Troubled Asset Relief Programme – that is to say the initial bail out of the banks, as opposed to the later unnecessary “stimulus packages” – has been a qualified success. Buying up toxic assets, as opposed to nationalising banks, means the government has been able to get away with a quick “in and out”, with no longer term commitments on either side. Most of the American banks repaid the government very quickly in order to get it out of their hair, and stability was restored to the US banking system within months. Those who still carp about it can see the alternative in Ireland.