Former Borsa Istanbul head eyes seat in post-election economy
ANKARA – Anadolu Agency
DHA PhotoTurkey’s economic institutions must be reconstructed while comprehensive growth-oriented economic policies need to be realized after the elections, said İbrahim Turhan, who left his chairman post at Borsa Istanbul to run for a Justice and Development Party (AKP) seat in the June 7 elections.
“Although I have no early expectations, after the election, I am ready to take on any responsibility that the government may offer me,” said Turhan, who is also a former board member of Turkey’s Central Bank.
“Turkey should relook at all of its economic institutions, and review their general philosophy and even consider a new fiscal policy to catch up with the rest of the world,” Turhan told Anadolu Agency on June 1.
“Many countries have changed the structure of their financial institutions since the crisis. The Bank of England has merged with the Financial Services Authority. The European Central Bank has taken on a wider responsibility for banking regulation and supervision. Before the crisis, one could hardly imagine that the ECB would lend to the banking industry based on instruments with a five-years maturity, at an almost-zero interest rate, buying private sector mortgage-based securities with almost no liquidity. The same thing happened in the U.S. with the Troubled Asset Relief Program,” Turhan said.
The U.S. TARP was a program allowing the Federal Reserve to purchase such instruments as part of a stimulus program. The European Central Bank is engaged in a similar stimulus program, injecting liquidity into the financial system.
“[Still] the new government will continue the free-market policies that have made Turkey successful. Institutions matter, not people, and the important institutions will continue: The AK Party program has made this very clear; the free-market economy will continue, the open economy will continue, the free float of the exchange rate for the Turkish Lira will continue, and the Turkish Central Bank will remain independent,” Turhan said.
There is concern among international investors about how Turkey’s economy will evolve if the Federal Reserve raises interest rates, he said.
“This concern is misplaced,” Turhan said. “First of all, I argued last September that there would be no rate hike before the end of this year. Everyone, at the time, expected one before the summer, but I am pleased to see now that I was right.”
In a speech on May 22, Federal Reserve Gov. Janet Yellen said there would be an interest rate increase this year, but only when conditions permitted it.
“The earliest expectation is September now, and it probably will be after that,” Turhan said, adding that the U.S. economic recovery was weak and that the strong dollar was a challenge to U.S. policy makers. “Further, although unemployment is down, the rate of labor participation is declining, so there are actually a large number of people out of the workforce.”
When the Fed decides to raise the rates, the rise will be gradual, so its effect on Turkey will be small, Turhan said.