Hard to build confidence in global markets
All local banks are saying that they are having major difficulty at this time generating confidence in external markets. Following the failed coup attempt on July 15, the view of the Western media has remained the same, and with the effect of this, foreign capital interested in investing in Turkey cannot be convinced.
Bank managers are saying that foreign capital owners lack confidence in the steps to be taken, with a majority of them saying, “From now on we will wait and look at what will be done, not what is being said.”
This is the first time such a deep difference of opinion exists between the local and foreign finance segments. Domestic capital owners including the financial segment openly declare their happiness over the failure of the coup attempt, praise the newly-formed political unity and support the government on the measures to be taken. Despite this, it has not been possible to change the views of the Western media containing the suspicion that there may be a trick behind the coup attempt.
Turkish journalists in the U.S. and the EU are stating that the government, in an incident where it is probably most justified, cannot generate confidence in the West.
I think the most critical point here is that as the government has lost its credibility before the West and particularly because of the distrust created by the wrongdoings concerning democracy, now it has a very hard time being credible.
For this reason, suspicions cannot be removed about the background of the failed coup and the usage of powers obtained by the declaration of the state of emergency.
Meanwhile, examples of wrong practices during detentions magnify the problem. Within the same context, the fact that the president has invited all political parties except the Peoples’ Democratic Party (HDP) representing the Kurds contributes to the strengthening of the Western public’s thesis that “the state of emergency will be used against the Kurds.”
The meeting of the political parties after the coup attempt was an important move in building confidence in the Western public, thus Western capital. The government is continuously highlighting this but it does not seem to be adequate; they continue saying, “We have to see the practice.”
Fear of international ratings
Local banks are saying that confidence should be built for the Western public and foreign capital as soon as possible. A detailed political declaration including the opposition may be needed to persuade international actors; it is very difficult for the ruling party to build this confidence alone, they say.
Meanwhile, banks fear the international ratings. Following S&P’s downgrading, if Moody’s and other rating agencies also downgrade, then it would be extremely difficult for Turkey. It is reminded that the markets that were disrupted by the coup attempt were not able to go back to their former levels because of the lack of confidence.
In these days when rate hikes are expected from the U.S. Federal Reserve, political and economic steps to build confidence in international markets should be taken very soon.