Istanbul’s mega airport symbolises crisis risk – NYT

President Recep Tayyip Erdoğan has ordered a mega airport for Istanbul costing $12 billion, but rather than herald the arrival of Turkey as a regional and global power, it is threatening to become the precursor of a financial crisis.

“Istanbul’s new airport has been engineered to provoke awe, underscoring Turkey’s desire to reclaim its imperial glory,” said Peter Goodman, European economics correspondent for the New York Times.

The airport the size of Manhattan, due to open partially in October, is a symbol of an unsavoury side of Turkey’s development, namely “reckless disregard for arithmetic and the independence of critical government institutions,” Goodman said. “Together they have placed the nation at growing risk of sliding into a financial crisis.”

Erdoğan inaugurated himself as Turkey’s new, all-powerful president on Monday, the culmination of his desire to become the sole political authority in the country. Announcing his cabinet following the June 24 presidential election, he appointed his son-in-law to head the Treasury and Finance Ministry and issued decrees that tightened his grip on education, the central bank and research and development institutions.

The lira has plummeted as a result, falling as much as 3.8 percent late on Monday as foreign investors tried to digest the news. Losses this year stand at 20 percent as investors worried that economic growth averaging more than 8 percent over the nine months to March, fuelled by tax cuts and loan guarantees, might be the precursor of a crash.

Erdoğan has wielded his vast influence to put the economy on steroids, but his policies have also increased corporate debt levels to “alarming heights”, Goodman said.

“The additional authority he has been granted is expected to further test the limits of economic reality.”

The airport to Istanbul’s east, designed to be the largest in the world, is just one of many infrastructure projects handed out to allies of the president with loans guaranteed by the state. If something goes wrong, and the companies can’t pay, then the Turkish taxpayer will have to. A canal running through Istanbul, designed to circumvent the Bosporus, is expected to cost tens of billions of dollars more.

Several of Turkey’s largest corporations have already fallen into borrowing difficulties. Banks took over Turk Telekom, Turkey’s largest telephone company, last week after its owner, Saudi Oger, failed to repay billions of dollars of debt. Yildiz Holding, the maker of Godiva chocolates, has already restructured $5.5 billion.