Home Levant The fires untended

The fires untended

Ankara absent in a economic crisis

by Peter Grimsditch

At times it seems that the Turks are fiddling while Rome burns, as Nero is alleged to have done in the year A.D. 64. Turkey’s unemployed are more numerous while industrial production and exports are in steep decline.

Yet an Ankara judge’s attempt to drag President Abdullah Gul into court for alleged misuse of party funds a decade ago is almost at the top of the current political agenda.

When the Welfare Party, predecessor of the ruling Justice and Development Party (AKP), was compulsorily wound up in 1997, its funds should have been handed over to the state, says the judge. In fact, they were channeled into helping set up the AKP. Though Gul was a member of the Welfare Party, his responsibilities were for foreign affairs, not internal party finance.

There can be little doubt that the embezzlement charge has less to do with maintaining financial probity than with hard-line members of the Republican People’s Party (CHP) keeping pressure on the AKP, which they fear is leading the country towards an Islamic state. Ironically, it also helps to disguise the steadfast — some say stubborn — attitude of the government toward a deal with the International Monetary Fund to stabilize the economy.

Months of negotiations between Ankara and the IMF have born no fruit. So in May the European Union presented a draft document at the Turkey-EU Association Council, extolling the virtues a deal would have on arranging fresh funds and restoring investor confidence. The biggest sticking point is that the IMF still believes the government spends too much money and raises too few revenues. There is now open talk of a new agreement being shelved until September, by which time Turkey would be compelled by a balance of numbers to see the error of its ways.

Those numbers include on one side a reduction in inflation to 6.9 percent, the lowest figure in 38 years, and a slashing of 7 percent off the central bank’s benchmark rate over the past six months. Not all the benefits of cheaper money seem to have been passed on to businesses or consumers. Garanti Bank, the most traded stock on the Istanbul Stock Exchange, reported a rise in income for the first quarter of this year that was 44 percent higher than for the same period in 2008. Analysts attributed a sizable proportion of the $416 million to the practice of reducing rates to depositors while at the same time continuing to reap the benefits of high priced loans.

Other statistics published in May show EU exports to Turkey down by 41 percent in the first two months of this year, while trade in the opposite direction slumped by 30 percent. Even the much publicized first Ford Transit vans to roll off the production line for export to the US failed to disguise the fact that most car plants are continuing to close for seven to 10 business days every month. Also out of a job are a third of Prime Minister Recep Tayyip Erdogan’s Cabinet, who paid the price for the party’s worst election showing since 2002 in the March municipal polls.

Consolidating the economic controls

Good for productivity perhaps, though not for employment statistics, was the news that Ali Babacan, who formerly headed up Turkey’s accession talks with the EU, will now be in charge of all three ministries connected with running the economy. His new job will save him the embarrassment of having to backtrack publicly on any enthusiasm for joining the 27-member European bloc. With both sides paying little more than lip service to the idea, the task of postponing indefinitely any serious attempt to join the club will be left to the new foreign minister, Ahmet Davutoglu. Davutoglu was Erdogan’s behind-the-scenes chief foreign policy adviser, and comes into the limelight with a track record of pushing relations with the East rather than the West. Like the president and the prime minister, Davutoglu is also a devout Muslim, as are several other new faces brought into the government.

While the appointment of conservatives doesn’t determine how the economic crisis will be approached, or how the public will react to the approach, it reinforces suspicions that the government sees shoring up support among conservatives as more important than practical measures.

For the record, there is no evidence that Nero, an effective general and administrator at the beginning of his reign, actually did fiddle while Rome burned. That hasn’t stopped the perception over centuries. The AKP could be perceived to have a similar problem.

Peter Grimsditch is Executive’s Turkey correspondent

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