Turkey’s Lira Crisis Tests Erdogan’s Authoritarian Approach
ISTANBUL — President Recep
Tayyip Erdogan has long made clear that he considered no part of Turkish life
beyond his reach, not least the economy.
Even before he was
re-elected in June with sultanlike powers, he had built his popularity on
sustained economic growth fueled by signature megaprojects — the latest being
plans for a canal bisecting the country. But critics have long charged that
much of that expansion was built on budgetary sleight of hand, cronyism and
corruption.
Now Turkey’s worst economic crisis since 2001 — the currency hit another new low on Monday — has confronted Mr. Erdogan with the limits of his authoritarian approach and could end his long run of success.
It is also fanning fears of a global contagion, as Turkey’s troubles undermine investor confidence in other emerging market economies and raise concerns about the exposure of banks even in developed regions, like the European Union.
Turkey’s economic troubles, analysts say, are largely of Mr. Erdogan’s own making. They have less to do with his dispute with the United States and the prospect of greater sanctions than with Mr. Erdogan’s deepening economic interference as he attempts to bend the logic of monetary policy and global financial markets to suit his political purposes.
Yet while Mr. Erdogan asserts greater control over life in Turkey — including the media, the judiciary, foreign policy and political decision-making — it is far less clear that he can bully an economy increasingly beholden to global markets to submit to his will, they say.
Business leaders warn that the many strands of the president’s authoritarian approach are intertwined, and that Turkey will not climb out of its hole until the country enacts major structural reforms that would undo many of Mr. Erdogan’s constraints.
Those would include allowing a free press, an independent judiciary and returning powers to Parliament. Another step, the release of political prisoners, would help repair relations with Europe.
“We have to do something at home,” said Umit Pamir, a former ambassador to NATO. “Only then can investors come.”
While Mr. Erdogan could still change course, whether he will is far from certain. In the meantime, the levers available to him will not avert the economic pain that is now inevitable, they say.
“The interest-rate hikes and budget cuts will be painful,” said Atilla Yesilada, an Istanbul-based consultant at Global Source Partners, a management consultancy. “There will be bankruptcies.”
Many analysts say that, as he has accumulated power, Mr. Erdogan has become increasingly isolated, surrounding himself with advisers who reinforce his own views, while sidelining real expertise.
In particular, Mr. Erdogan has insisted on following a policy of keeping interest rates low to allow a huge program of fiscal stimulus based around the construction industry to generate high growth.
In May, in an interview with Bloomberg TV, Mr. Erdogan explained why he wanted more control over the central bank and interest-rate policy.
“When the people fall into difficulties because of monetary policies, who are they going to hold accountable?” he asked. “Since they’ll ask the president about it, we have to give off the image of a president who is influential on monetary policies,” he added.
