Dilek Gül
Dec 09 2017

Turkey is on trial in New York, Yeşilada says

Turkey is on trial in a New York courtroom, more so than a banker and gold trader accused of circumventing U.S. sanctions on Iran, Atilla Yeşilada, economist, columnist and a consultant for foreign investors and institutions, told Ahval in an interview this week.

The trial in New York accuses the defendant, Halkbank official Mehmet Hakan Atilla, of conspiring with Zarrab to defraud the banking system, launder money, and deceive the U.S. Treasury. For the last two weeks, millions of people in Turkey have been focused on the proceedings and the testimony of Zarrab, suspect turned star witness for the prosecution.

“This case is not about people—Turkey is on trial right now. That means that if Turkey treats this as a trivial matter, doesn’t admit culpability, and Halkbank merely pays a fine in order to save itself, Turkey will find itself in a much bigger mess. Therefore, it is crucial that urgent actions plans are drawn up -- sanctions against Turkey by U.S. regulators in terms of money flows are a real possibility.

“Many of our banks and companies could be banned from doing business. A state with any vision would be prepared for such possibilities, but we are not prepared. This situation is also extremely important politically because from this point forward, once judgements have been handed down, the political fallout will begin. However, what we see is President Recep Tayyip Erdoğan making everything worse by shouting about the trial and challenging the rules of political negotiation. Everywhere he goes, he claims the American judicial system and government are involved in a conspiracy against Turkey.”

While everyone is watching to see whether Zarrab will be acquitted in the trial, new cases against Turkey could be opened, Yeşilada said.

So, with this backdrop, and with economic growth slowing, there is a distinct possibility that the government will call early elections next year, which won’t be good for Turkey, Yeşilada says.

 “If they decide to go to early elections, the government would have to run on a very populist platform and, in order to get the electorate’s vote, would have to continue with these claims that the whole world is our enemy. But I don’t know if they can attract this support as the economy begins to stagnate.”

With all the political polarization, squabbling with the outside world, and increasing problems with the economy, it will be very difficult for the government to hold elections as scheduled in November 2019, Yeşilada says. And uncertainty about the result spells trouble for the economy, he said.

“When there is a lot of uncertainty, when there is an election in which it is unclear who will win, the economy stagnates. Foreign investors will start pulling out money and it will be turmoil in Turkey.

“When election results are more certain, economic uncertainty decreases. Private and state banks are sound, so there won’t be another economic crisis like the one in 2001, but unemployment is increasing, foreign exchange rates and interest rates are rising, and the banks aren’t giving people credit for new homes and cars. Shopping malls are empty.

“The world is changing quickly, but here in Turkey we grew the economy on waves of credit from abroad. Most of the money we got from foreign countries is tied up in skyscrapers. Now, interest rates are rising…

“But we’re a country that can’t live without credit. How will we pay off all of this high interest? How will people buy a car in 36 installments? How will they pay for their factories and skyscrapers? The government thinks everything will remain the same as it is today, that the economy will continue to grow at 8 percent. But in these conditions, business activity is stalling. I don’t believe the government can continue like this until 2019.”

Yeşilada said that after the Gezi park protests, Turkey has gone backwards, both politically and economically.

“Since 2013, we have gotten poorer. Food and fuel prices have soared. Inflation is at 13 percent. Whether it’s the ruling party or another political power, they need to respond to society’s demands. This divisive and humiliating understanding of politics has to change. People want peace, lasting prosperity, and tranquility. It will soon become clear whether or not there is anyone who can do this.”