Is there a fracture in the economy’s management?
SEYFETTİN GÜRSELWe know that within the Justice and Development Party (Ak Party) government, from time to time, there are disputes about economy policies.
I guess the most significant difference of opinion was experienced during Prime Minister Recep Tayyip Erdoğan’s “interest rate lobby” proclamation last June. We fully discussed this surprise announcement at the time. Chairman of FED Ben Bernanke’s announcement on gradually slowing down the bond-buying program coincided with the peak of the Gezi Park protests, the foreign exchange rate and market interests started to climb rapidly as a result of capital exit and the stock exchange started to fall. In this environment, according to the conspiracy theory announced personally by the prime minister and his close aides, major actors not happy with the low interest policy had started to pull back their capitals to erode the Ak Party government.
Actually, there was nothing mysterious about what was happening. As in any other country that has a high current accounts deficit, in Turkey also, several local and international investors were taking their guards against the tightening of monetary policies perspective of the FED. Despite this, the “interest rate lobby” claim caused the questioning of the capability to manage an open market economy that has been integrated with the world economy; and the possibility of a radical change in the approach to economy.
We know what happened next. Before the situation got worse, a critical meeting was held at Dolmabahçe, headed by the prime minister and attended by all ministers in charge of economy. In the short announcement after the meeting, it was emphasized that the economy would continue to be managed according to open market principles. In the press conference Chairman of the Central Bank Erdem Başçı held the next day, it was further reassured the independent monetary policy would not be impaired.
We do not know what kind of a debate was experienced within the government, who asked for the meeting, how the prime minister was convinced during the meeting. I do hope that we will learn one day. After the meeting, the “interest rate lobby” discourse ended and business got back to normal.
Since the first day, I have been thinking the Dolmabahçe meeting was a very critical landmark. My guess is that Ali Babacan, who managed to keep quiet while the “interest rate lobby” accusations were climbing, somehow was able to convince the prime minister of how grave the state of affairs was.
I can almost hear you saying, “All right, but, why this flashback?” This is why: I came across a quite mysterious expression in the economy section of the EU Progress report. I am quoting from the EU Ministry’s unofficial Turkish translation: “The fragmentation of responsibilities between government bodies continues to complicate the coordination of budgeting and medium-term economic policy-making.
However, it seems economic policies have not been affected by internal conflicts and tensions in recent times. Overall, the consensus on economic policy essentials has been preserved.”
This rather covert statement, I think, is referring to the fracture that was experienced in economy management this summer, the one I tried to sum up above. It is significant that the matter is included in the Progress Report. However, a more important aspect lies in a tiny detail. In the English original text, the last sentence is “the consensus on economic policy essentials has apparently been preserved.” In the Turkish translation, somehow the word “apparently” has been omitted.
Seyfettin Gürsel is a columnist for daily Radikal in which this piece was published on Oct. 23. It was translated into English by the Daily News staff.