State guarantees

The state operates public services to meet collective and general needs of the society, and thereby ensures the public interest. The neoliberal economic context of today assumes that the state should establish a limited number of services of good quality and leave the rest to the private sector. Such assumption has affected the legal field, and it has had a transformative function in regulations regarding the operation and financing of public services. Thus, the classical understanding of the state that directly operates and finances public services has changed, and it has been replaced by an understanding of the state that aims to ensure the public interest by different means. With its new roles which has changed and intertwined under such neoliberal assumption, the state has been able to finance public services within the participation of private actors. The state may finance public services on its own or within the participation of private actors, and in both methods, it may take advantage of a financial power by using the financial influence of the Treasury or its administrations. State guarantees are based on such foundation. In the case where public services are directly financed by the state itself, it is possible for the state to apply for a debt. In contrast to an ordinary debtor-creditor relationship, there are no asset or measure available to the creditor in state borrowing. Then, the state needs to prove that it will pay its debt by giving guarantees to the creditor. Treasury repayment guarantees belong to this context. In the case where public service is financed by the participation of private actors, especially in public-private partnerships, the state undertakes certain risks that would normally belong to the private actor, and thus it supports the private actor under the legal framework. Treasury investment guarantees and demand guarantees belong to this context. Debt assumption agreement also belongs to this context; however, it does not constitute a guarantee in theoretical sense. The common feature of these two contexts is that it is not known whether or not the state will make a payment resulting from the realization of the undertaken risk, or when this will happen even if it will. When the undertaken risk realizes, the given guarantee results with a state debt and be included in the scope of state borrowing. State guarantees are contingent liabilities of state which may turn into a debt. In accordance with neoliberal assumption, it is rational for the state to employ state guarantees in financing public services since state guarantees serve to obtain the benefit intended by the public service in advance, and to postpone the costs that have an indefinite possibility of realization. However, this creates injustice for future taxpayers. Because, those who benefit in advance leave the risk of cost to future taxpayers. The repair of such injustice is possible by making good analysis of costs and benefits, by recording the guarantees in public accounts and keeping them open to public control, and by establishing financial transparency. Guarantee regulations and their application under Turkish law are insufficient to meet these requirements.