Erdogan under pressure in core areas before elections
WASHINGTON - A dramatic plunge of the Turkish lira and accusations of close ties to a man regarded as Turkey’s public enemy number one is putting pressure on President Recep Tayyip Erdogan as he hopes for a double win at parliamentary and presidential elections.
Investors sent the Turkish currency into a tailspin after Erdogan hinted he would use expanded executive powers as president after a possible election victory on June 24 to take over more responsibility for monetary policy, raising doubts about the independence of Turkey’s central bank.
Adding to Erdogan’s troubles are accusations by presidential hopeful Muharrem Ince that Erdogan had met with Fethullah Gulen, a US-based Islamic scholar and former Erdogan ally whom Erdogan alleges was the organiser of the 2016 coup attempt, in 2000. Erdogan denies the charge.
The developments could hurt Erdogan’s core assets as a political leader: his ability to deliver financial stability and economic growth and his personal credibility as a man who has ruled Turkey for 15 years either as president or prime minister.
A survey by the MetroPoll company said the number of Turks stating disapproval of Erdogan’s job performance was higher than that of voters saying they support the president for the first time in two years. In the poll, 47.8% of respondents said they did not like the way Erdogan did his job and 46.3% said they did.
The central bank’s decision to raise the country’s key interest rate — against Erdogan’s will — on May 23 stopped the lira’s decline but experts said bank officials waited too long before stepping in. “Getting late in raising interest rates has fuelled the sense that [the] fire brigades will always be late and you cannot go back to normal,” economist Ugur Gurses wrote in the Hurriyet Daily News.
Even after strengthening from a record low of 4.92 against the US dollar following the rate hike, the lira has lost more than 15% of its value against the dollar since the start of the year.
Turkey depends on imports of oil and gas, usually traded in dollars, and is burdened with higher than expected inflation and a high current account deficit. In an indirect admission of the severity of the foreign exchange problem, Erdogan called on Turks to protect their currency: “Invest the dollars that you keep under the pillow into liras,” he said during a speech May 26. “Together, we will foil this plot.”
Erdogan and his government said the weakness of the lira is the result of a conspiracy of anti-Turkish forces abroad. Foreign Minister Mevlut Cavusoglu said “some Muslim countries” were part of the plot. He did not name the countries but Turkey has been at loggerheads with several Muslim nations, including Syria, Egypt and the United Arab Emirates.
An international financial expert dealing with Turkey said the country’s economic situation was cause for concern. “The Turkish economy is facing a serious crisis,” the expert, who declined to be named because of the subject’s sensitivity, said in an interview. “All that the state and especially companies can get now are short-term loans and those are getting expensive.”
The expert added that Turkey was suffering from an “outflow of capital and talent” because investors were fleeing. “Nobody wants lira anymore,” he said.
Many Turks blame their problems on negative trends of the economy, a development that could pressure Erdogan’s ruling Justice and Development Party (AKP) and the president himself.
“The economy is now being seen as a bigger problem than terrorism,” Murat Gezici, a respected pollster, said in an interview. “Erdogan has lost his credibility in the field of the economy.”
Going against orthodox economic theory that says interest rates should be raised to combat inflation, Erdogan says low-interest rates are the key to low inflation and higher growth. The Turkish president describes himself as an “enemy of interest rates,” a stance that could lead to even more economic problems before polling day, some experts say.
“He picks battles with everybody,” a fund manager told Reuters after Erdogan defended his position in a meeting with investors in London. “Now he is fighting the markets and that is dangerous.”
To limit the damage, Deputy Prime Minister Mehmet Simsek flew to London to reassure investors. Economists at Commerzbank described Simsek’s trip as “damage limitation” after the visit by Erdogan, Reuters reported.
At home, Erdogan has been under attack by Ince, presidential candidate of the secularist Republican People’s Party (CHP), Turkey’s biggest opposition group. Some polls predict Ince could rake in enough votes on June 24 to force Erdogan into a run-off on July 8. The AKP could also lose its parliamentary majority, some surveys indicate.
Against this background, Ince’s accusations of Erdogan’s ties with Gulen come at a bad time for Erdogan. For much of the early 2000s, Erdogan’s AKP cooperated with the Gulen movement, whose followers rose to leading positions in state institutions. However, since Erdogan and Gulen fell out in 2013, the government has portrayed the Gulen group as a terrorist network. Erdogan has said he was “deceived” by Gulen in the past.
Citing a book by a pro-Erdogan journalist, Ince said Erdogan met with Gulen in 2000 in the United States to get the scholar’s blessing to form the AKP a year later. The opposition candidate said Erdogan always claimed to have been misled if something went wrong. “He has been deceived constantly,” Ince said, implying the president avoided taking responsibility for his actions.
In response, Erdogan filed a civil suit, demanding 100,000 lira ($22,400) in damages from Ince. The author of the book cited by Ince, Nasuhi Gungor, said his account of the meeting between Erdogan and Gulen had been based on a rumour.