Erdoğan’s weekend tantrum signals weakness, possible economic suicide - FT

Turkish President Recep Tayyip Erdoğan’s decision at the weekend to sack the governor of the central bank and withdraw Turkey from a treaty to prevent violence against women are signs of weakness, Financial Times international affairs editor David Gardner said on Tuesday.

Erdoğan’s dismissal of governor Naci Ağbal could amount to economic suicide, while the country’s exit from the Istanbul Convention threatens to kill off its reputation as a democracy that protects all citizens, Gardner said.

Ağbal had benefitted from a sudden weekend presidential decree in early November, when Erdoğan hired him to replace his predecessor Murat Uysal after the lira hit a record low against the dollar. That prompted Erdoğan’s son-in-law Berat Albayrak to resign as treasury and finance minister and marked a pause to populist economic policies that had included burning through more than $100 billion of the central bank’s reserves while engineering a borrowing boom.

But now the departure of Ağbal – his three hikes to the benchmark interest rate in five months had helped the lira to rally and foreign investors to return to the country – has sparked a renewed sell-off in the lira

Erdoğan must have been grinding his teeth as he saw G20 countries trying to get their heads around negative interest rates, Gardner said.  Inflation was still accelerating – it was too early for Ağbal’s rate hikes to feed through into lower prices increases – giving Erdoğan the proof he needed that his theory that inflation is caused by higher interest rates was correct, he said.  

Gardner said that reverting to unorthodox monetary policies in Turkey – Ağbal’s replacement concurs with Erdoğan and his theories on interest rates – carries huge risks for Turkey as it seeks to refinance about $180 billion in foreign debt this year.

However, Erdoğan’s decision to sack Ağbal almost pales when compared to him pulling Turkey out of the Istanbul Convention, Gardner said. The increasingly autocratic president has, in one foul swoop, lifted fragile protections from half of the population of the country, where as many as three women a day are murdered, he said.

“This is a very dark tunnel we’re going through”, Elif Şafak, a leading Turkish novelist, told the FT. “When you lose democracy, women’s rights and minority rights are among the first to go.”

Erdoğan has all but crushed the independence of the judiciary and, now cocooned by courtiers, has almost lost the ability to set coherent policy, according to Gardner. Erdoğan now concentrates on throwing political red meat to his Islamist and ultranationalist electorate, he said.

The president’s actions are a demonstration of power, but also of vulnerability, Gardner said.