Problems in economy, foreign policy deepen by lack of trust

Turkey’s economic and foreign policy problems are increasing by the lack of trust in the government of President Tayyip Erdoğan.

There are a few examples that immediately come to mind.

First, Turkey’s Business and Industrialists Association TÜSİAD President Simone Kaslowski met with economic and political circles in the USA last week and talked about Turkey. Following his visits, he summed up the problems between the two countries as “lack of mutual trust,” calling out both parties to focus on fixing the lack of mutual trust. But how will this happen when there is a chronic anti-Erdoğan mood in the US, especially in the Congress, and on the other hand, there are sanctions, including the Russian S-400 and the F-35, against Turkey.

Another example is the evaluations and remarks of Süreyya Serdengeçti, a former Governor of the Turkish Central Bank (CBRT).

Serdengeçti is one of the state officials who silently, humbly and dully do their job for this country, succeed and step aside. He was appointed as the Governor of the Central Bank in the middle of the 2001 crisis, which was one of the most challenging periods of the Turkish economy. He managed to decrease the consumer inflation rate from 37,5 to 8,1 during his term which lasted in 2006. Serving both before and after Erdoğan’s Justice and Development Party (AKP) he was the one who proposed the idea of removing six shameful zeros from the lira to the government, and made it happen.

He broke his silence this weekend.

“This inflation is shameful”

Retired CBRT Governor spoke at an online conference, “What is the trajectory of the economy?” organized by Social, Economic and Political Research Foundation of Turkey TUSES, on Nov. 20.

“This inflation is shameful,” said Serdengeçti who once had fought against inflation and tried to protect the value of the Turkish lira. “One out of six zeros is back,” he said.

There are other things that he said. For example, he said CB’s forecasts are not foreseeable for a long time, there is a credibility problem. The problem of credibility is the problem of trust. But he also touched on other points that undermine confidence in the government. Serdengeçti, who is the Director of the Stability Institute under the Turkish Economic Policy Research Foundation (TEPAV), a think tank supported by the Union of Chambers of Commerce (TOBB), also says that in terms of price stability, Turkey went back to 20 years ago, that is, to the days of the 2001 crisis.

He says that to decrease interest rates without reducing inflation is a dream.

Then he claimed that the amount of foreign currency exchanged from public funds to keep the currency rate artificially low was 140 billion dollars, not 128 as claimed by the opposition. According to Serdengeçti, this is a legitimate process, but what is not legitimate is not keeping the records transparent. In other words, to whom and in which exchange rate and in what amount this exchange happened is under a shadow.

Speaking of both the USA and Russia…

The fact that the president of TÜSİAD expressed the clearest evaluation regarding relations with the USA, which is still the most important foreign policy problem of Turkey, reveals the dependency relationship between economy and foreign policy.

Ayşem Sargın, President of the International Investors Association (YASED) says, “The times have changed. The economy is now also a matter of national security. We need to take international steps to bring this forward.” According to Sargın, Turkey’s risk perception reduces foreign investment.

Risk perception is also an issue of trust. Risks increase in President Erdoğan’s policy of using rapprochement with Russia as a lever in relations with the United States, especially after the coup attempt on Jul. 15 2016. The US sanctions on Turkey (including expulsion from the F-35) over the S-400, and its growing conflict with Russia (on issues such as Ukraine, Libya) can be given as examples for rising risks. Relations with the European Union, on the other hand, are primarily reduced to immigration policy and the problems experienced in the Aegean and Eastern Mediterranean with the Greek and Greek Cypriot governments.

Of course, the feelings are mutual. Erdoğan does not trust the governments of this country either; I cannot say that this is unfair.

On the other hand, if Erdoğan can face the fact that the problem is not Turkey but the lack of trust in him, it will be easier to tackle those problems. The real problem is there.