A.If the Turkish President Recep Tayyip Erdogan had not had enough to do with his many foreign and economic policy crises, since the weekend there has been additional turbulence in personnel policy: completely unexpectedly, Finance Minister Berat Albayrak resigned on Sunday evening.
The way it was advertised was also unusual: on Instagram. The forty-two year old gave health reasons there. He wants to spend more time with his family. The ministry confirmed the authenticity of the declaration, but it was unclear on Monday morning whether Erdogan would even accept the resignation.
In addition to the political quarrel, there may be something in the family. Albayrak has been married to one of Erdogan’s daughters since 2004. Some saw him as more than their son-in-law, namely Erdogan’s political foster son.
New central bank chief promises price stability
The unusual nature of the resignation surprised even Albayrak’s own staff, who, according to the financial service Bloomberg, reported that the minister could not be reached, his phone switched off. Albayrak also appeared to have deleted his Twitter account on Sunday.
In Turkey, Albayrak’s resignation has been linked to the sudden change at the top of the central bank previously announced in the official gazette on Saturday. There, Naci Abgal, a close friend of Erdogan’s and, according to media reports, a critic of Albayrak’s economic and financial policy, replaces the governor Murat Uysal, who was appointed 16 months ago.
This was rated positively by investors in the financial markets. The national currency, the lira, which has been under devaluation pressure for months, started the week stronger. Against the dollar and the euro, it achieved gains of more than one percent. At the beginning of the week, the dollar was quoted around 8.41 lira, the euro slipped back below the 10 mark to 9.98 lira.
In a press release from the central bank, Abgal, who most recently headed the budget and strategy office in the presidential palace, stated that his most important goal was “to maintain price stability”. All instruments would be used for this. He also promised transparent communication. By the next meeting of the monetary policy committee on November 19, he will now have a precise overview of the situation. “Necessary political decisions are made in the light of the data and evaluations to be formed.”
Economists at Deutsche Bank said in an analysis that what was needed was “an aggressive tightening of monetary policy – the sooner the better – and a strong verbal commitment from the central bank and government to reduce inflationary pressures”. They criticized the strong meltdown in foreign exchange reserves and Turkey’s persistently high current account deficit. Banks estimate that Turkey has spent around $ 100 billion this year alone to fight the devaluation of the lira.
Gunter Deuber, chief analyst at Raiffeisenbank International, assesses Albayrak’s resignation from F.A.Z. positive. That makes a financial reorientation easier. Albayrak had “rather the focus on political economic policy than economic-political rationality”.
He recently justified the lira weakness with the Corona crisis and the American election. That the argument is wrong is shown by the fact that the lira performed worst against other emerging market currencies this year, and that other currencies even appreciated against the recently weak dollar.
In many cases, however, doubts were expressed about the independence of the new central bank governor. Commerzbank analyst Tatha Ghose writes as an example: “With the dismissal of Uysal, it is now sufficiently proven that we are dealing with a fundamental problem. Erdogan fired the central bank governor he appointed last year. And he fired him exactly when he was just beginning to raise interest rates. “
Agbal’s appointment suggests that Erdogan wants to keep the central bank under control “directly, with no intermediaries, with an ever-shrinking group of close supporters.” Erdogan brought Albayrak, the former energy minister, into the cabinet as finance minister in July 2018 after Turkey switched its political system from a parliamentary to a presidential system as a result of the 2016 coup attempt.
The Turkish economy has been in crisis for a long time. In the past few days, the Turkish lira had fallen in value particularly rapidly and again hit a record low on Friday in euro and dollar trading. For one dollar, 8.576 lira had to be paid at times – that is around 49 percent more than a year earlier. Recently, one euro cost almost 10.18 lira at times. This corresponds to an increase of around 60 percent within a year.
Erdogan had always rejected the interest rate hikes demanded by experts to combat the 12 percent inflation. He threw out the predecessor Uysals in July 2019 because it had set the key rate at 24 percent. Uysal then lowered it to 8.25 percent, but recently raised it again to 10.15 percent. Just a week ago, Erdogan said the country was in an “economic war”. He spoke of a “devil’s triangle” consisting of interest rates, exchange rates and inflation.
This is not the only “war” the country is waging. Turkey is militarily active in Syria, Libya and – indirectly – in the Caucasus. Political disagreements with America, whose elected President Joe Biden is considered a critic of Ankara, as well as ever new disputes with the EU over legal and religious questions or economic issues such as the search for gas in areas in the Mediterranean that other countries claim for themselves, also weigh on economic and financial policy Relationships.