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Financial tremors threaten Recep Erdogan’s hold on Turkey

A place to talk about domestic politics in Middle East (Iran, Iraq , Turkey, Syria) Also includes topics about Assyrian, Armenian, Chaldean .

Financial tremors threaten Recep Erdogan’s hold on Turkey

PostAuthor: Anthea » Wed Aug 15, 2018 12:05 am

Financial tremors threaten Recep Tayyip Erdogan’s hold on Turkey

It seems obvious what Recep Tayyip Erdogan needs to do to pull Turkey out of the currency crisis that could sink its economy. Yet as the lira tanks and President Erdogan rages against a looming disaster that is in good part self-inflicted, his reluctance to do what is required is equally obvious — unless he thinks he might lose his unassailable political hold on Turkey in any economic meltdown.

Re-elected president in June with new powers that swept away the checks and balances of Turkey’s parliamentary system, Mr Erdogan rules a nation split down the middle.

On one side, the conservative masses of Turkey’s Anatolian heartland to whom he and his neo-Islamist ruling party have given voice. These people had been marginalised as pious backwoodsmen by the other side, the secular elites who ran the country as their inalienable inheritance from Mustafa Kemal Ataturk, founder of the republic almost a century ago. His followers always say Mr Erdogan was the first to include them — and give them dignity and identity. But his ability to provide for them — and his network of cronies — is now in peril.

For Mr Erdogan, economics is an accoutrement to politics — to be draped around the election calendar. He has clocked up 13 victories in more than 15 years in power. He took office in 2003 as Turkey emerged from its worst financial crisis since 1945. Rarely has he faced hard economic choices.

His construction-and-consumption economic model, based on huge inflows of cheap foreign credit, was already vulnerable before he drove it to overheating. The results are: inflation, which he refuses to tackle with higher interest rates; a plummeting currency, imperilling conglomerates and banks on the hook for close to $300bn in foreign loans, nearly half of which mature in the next 12 months; and a widening current account deficit raising the spectre of a balance of payments crisis.

The essentials for this emergency were in place before Mr Erdogan fell out with Donald Trump, hitherto such an admirer that he fist-bumped the Turkish president at last month’s Nato summit. True, the list of grievances between Washington and Ankara is long. Turks are livid at US support for Syrian Kurd fighters linked to the PKK insurgency inside Turkey, and their refusal to extradite Fethullah Gulen, the Pennsylvania-based imam and former Erdogan ally whose shadowy network Ankara blames for the abortive coup in 2016.

The US is fed up with Nato ally Turkey’s dalliance with Russia, its breaking of sanctions on Iran, and — the final straw — the detention of Andrew Brunson, an evangelical Protestant pastor Ankara claims colluded with Gulenists and the PKK. President Trump seems to believe Mr Erdogan welched on a deal to release Mr Brunson, hitting him with sanctions on two ministers and doubling the tariffs on Turkish steel and aluminium — this accelerated the collapse of the lira and, as Mr Erdogan has it, stabbed Turkey in the back.

The Turkish president’s choices may seem obvious but, for him, they are treacherous snares. A salutary rise in interest rates, according to Mr Erdogan, creates inflation. More to the point, it would endanger credit-fuelled growth-at-any-cost ahead of municipal elections in March next year. Mr Erdogan, a former mayor of Istanbul, is terrified of losing the big cities and knows he cannot survive against them.

Going to the IMF, like Argentina, means a loss of sovereignty — and kowtowing to the US, which anyway might block a bailout. Freeing Mr Brunson means a loss of face.

For now, Mr Erdogan is beating his breast. Turkey will find “new friends and allies”, he wrote in the New York Times, threatening “we will say bye bye to those who sacrifice their strategic partnership and alliance with a nation of 81m people on the altar of their relations with terror organisations”.

He has long since jettisoned his closest comrades and surrounded himself with courtiers and conspiracy theorists. Instead of Mehmet Simsek, his former economy chief who enjoyed credibility in the markets, he has Berat Albayrak, his untested young son-in-law.

It is to be doubted his “new friends” will bail him out. Russia’s priority is to have Ukraine-related sanctions lifted; China’s priority is to end Mr Trump’s trade war; gas-rich Qatar, Turkey’s one surviving Arab ally, has its hands full with a Saudi-led blockade.

Yet Mr Erdogan should recall that violent financial tremors in Turkey often crack open its political edifice. It was the turn-of-the-century financial crisis that helped propel him to power, and create a new establishment at the expense of the old Kemalist political order. There is a lot to play for. ... b7a9ce36e4
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Financial tremors threaten Recep Erdogan’s hold on Turkey



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