Turkey asks for “self-sacrifice” from citizens to rescue builders

When credit rating agency Moody’s lowered the ratings of 20 major Turkish banks on Aug. 28, Environment and Urban Planning Minister Murat Kurum rushed to kick-start what he called a national mobilisation operation. Tellingly, this aimed not to shore up the country’s beleaguered banking sector, but to encourage the sale of homes to save construction companies close to the government.

President Recep Tayyip Erdoğan and his government have placed the blame on Turkey’s faltering economy on what they call a foreign attack, and sure enough, the most recent plummet in the lira was triggered by the ongoing diplomatic crisis over the detention in Turkey of pastor Andrew Brunson and other U.S. citizens.

But confidence index figures released by the Turkish Statistical Institute paint a different picture. The government agency’s analysis shows that confidence among Turkish businesspeople and households has dropped to lows previously seen during the crisis periods of 2001 and 2009, and this trend began long before the current fallout with the United States.

Figures from the construction industry are among the most alarming. This is why, prior to the June 24 elections, the ruling Justice and Development Party (AKP) ordered state banks to lower interest repayments on new mortgages to below 12 percent annually, meaning they would be making a loss. This initiative has failed to reinvigorate the sector, and three months later the AKP is trying again with its “national housing mobilisation.”

 The latest initiative promises to guarantee newly purchased properties against their current value in gold or foreign currency terms, and to return the difference in the event that the lira falls in value against these. In the government’s words, it will remove the need for citizens to hold savings in gold and foreign currencies. 

Yet with rates for these currently changing five times a day against the lira, it is doubtful how willing people will be to put their savings into apartments that will only begin to make a return in 20 to 25 years.

The Banks Association of Turkey has announced figures for the first half of 2018, showing a total of $11 billion in bad debt, the majority of which is from mortgages. Around 14,000 properties have been seized by banks as a result, around half of these to three major public banks.

When the lira began to plummet this month, Erdoğan called on Turkish citizens to change their gold and foreign currency savings into lira. Now similar calls for mobilisation to buoy the housing sector indicate government worries that the housing bubble is about to burst. 

Kurum, the minister in charge, tellingly presents the campaign as a “sacrifice” for the good of the nation to ward off the shadowy enemies that the administration blames for a series of protests and scandals since the nationwide Gezi Park anti-government protests of 2013. 

“Now that we are facing an economy siege, some find our national stance, national unity, national mobilisation disturbing … Today is not a day for our sector to profit, but for self-sacrifice,” Kurum said.

Naturally, there is no sign of any sacrifice from those firms close to the government that have secured public contracts guaranteeing decades of income worth almost $100 billion. So it falls on Turkish citizens to make the sacrifice, by converting their savings to lira and pouring money towards saving the construction industry.

Yet, whatever measures the government may take to place a band-aid over the gaping wounds of the economy, the confidence indexes show that nobody is convinced any longer by its claims that the country’s financial situation is under control.

 

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