The Turkish head of state is demanding a “competitive” lira.
(Photo: dpa)
Istanbul The Turkish head of state Recep Tayyip Erdogan dares the impossible: He wants to be stronger than the financial markets. Its relatively low key interest rates are supposed to dampen inflation. With a weak lira, he wants to free the Turkish economy from its notorious trade deficit in the middle of a pandemic.
The president takes on global investors and his own constituencies. A fight he will lose on both fronts. Erdogan has sent the Turkish lira further into the abyss through announcements, staff exchanges and with the help of the central bank’s interest rate cut since the beginning of December: minus 30 percent.
Now, with a bunch of measures, he has brought the course back to where it was at the beginning of the month overnight. Savings are linked to the exchange rate. In addition, the central bank wants to pay exporters for exchange rate risks, recipients of minimum wages and civil servants get a tax-free allowance. Investors pay less tax on dividend income.
But millions of people in the country are suffering from Erdogan’s economic policy. Savers who have exchanged their lira for dollars now get less for their foreign currency back. Companies that do not know how much their products are still worth are becoming more cautious and paralyzing the economic cycle. Banks, which are accumulating ever greater risks, could soon grant fewer loans and dampen economic growth despite lower interest rates.
Top jobs of the day
Find the best jobs now and
be notified by email.
No one, from Turkish workers to international investors and analysts, can explain Erdogan’s logic. Japanese high-risk traders in particular are said to have been responsible for the overnight lira jump. But that doesn’t mean that Erdogan will get a tailwind from the markets for his politics.
Everything investors and analysts see is chaos. He makes it easy for the opposition in the country. It just has to promise to end this chaos and return to orthodox politics. Even this promise catches on with the citizens, as the surveys show. Many can no longer accept Erdogan’s demand that the population trust him.
It was Erdogan himself who brought poor Turks to prosperity – and thus himself from election victory to election victory. The next elections will take place in a year and a half at the latest. Erdogan wants to compete again and win. However, its star has already started to decline.
More: Lira weakness: German economy records slump in exports to Turkey