President Tayyip Erdogan signalled on Saturday his newly-elected government would return to more orthodox economic policies when he named Mehmet Simsek to his cabinet to tackle Turkey’s cost-of-living crisis and other strains.
Turkey’s new cabinet also includes Cevdet Yilmaz, another orthodox economic manager, as vice president, and the former head of the National Intelligence Organisation (MIT) Hakan Fidan as foreign minister, replacing Mevlut Cavusoglu.
Only Health Minister Fahrettin Koca and Tourism Minister Mehmet Nuri Ersoy retained their jobs from the outgoing cabinet.
Serving chief of military staff Gen Yasar Guler grabbed the critical Ministry of Defense position. Another critical job, that of Ministry of Interior went to former Ankara governor Ali Yerlikaya.
WHAT COULD SIMSEK DO?
Simsek’s appointment as treasury and finance minister could set the stage for interest rate hikes in coming months, analysts said – a marked turnaround from Erdogan’s longstanding policy of slashing rates despite soaring inflation, reported Reuters in its first take on Erdogan’s new Cabinet.
The choice to appoint Hakan Fidan, the longtime head of Turkey’s National Intelligence Organization (MIT), as foreign minister to replace tenured diplomat Mevlut Cavusoglu suggests a future potential shift in Turkey’s style of foreign relations.
Fidan headed MIT for 13 years, and has had recent meetings in Moscow with his Russian, Iranian and Syrian counterparts concerning the conflict in Syria, commented the Guardian.
After winning a runoff election last weekend, Erdogan, 69, who has ruled for more than two decades, began his new five-year term by calling on Turks to set aside differences and focus on the future, after which he gleefully returned to his habit of blaming the opposition for all Turkey’s ills.
Emre Erdogan from Bilgi University noted the president’s speech “addressed unity and solidarity several times, and he underlined the importance of forgetting resentment and anger which voters felt during his election campaign”.
“He talked about a liberal and inclusive constitution and that’s important because he never talked in this way [before]… He also talked about the role of Turkey in the region as a peacemaker. He tried to show the key role of Turkey in world politics”, according to al Jazeera.
Erdogan’s inauguration ceremony at Ankara’s presidential palace was attended by NATO Secretary-General Jens Stoltenberg, Venezuelan President Nicolas Maduro and other dignitaries and high-level officials.
Simsek, 56, was highly regarded by financial markets when he served as finance minister and deputy prime minister between 2009 and 2018.
The apparent U-turn on the economy comes as many analysts say the big emerging market is heading for turmoil given depleted foreign reserves, an expanding state-backed protected deposits scheme, and unchecked inflation expectations.
QUESTION OF INDEPENDENCE
Analysts said that after past episodes in which Erdogan pivoted to orthodoxy only to quickly return to his rate-cutting ways, much would depend on how much independence Simsek is granted.
“This suggests Erdogan has recognised the eroding trust in his ability to manage Turkey’s economic challenges. But while Simsek’s appointment is likely to delay a crisis, it is unlikely to present long-term fixes to the economy,” said Emre Peker, a director at Eurasia Group covering Turkey.
“Simsek will likely have a strong mandate early in his tenure, but face rapidly increasing political headwinds to implement policies as March 2024 local elections draw near.”
Liam Peach of Capital Economics wrote that Simsek’s appointment to the cabinet “provides encouraging signs that President Erdogan will moderate his economic policies. But there are still question marks about whether policymakers are about to embark on a fully fledged return to orthodoxy.”
In his post-election victory speech, Erdogan said inflation was Turkey’s most urgent issue.
Whether he will allow Simsek to cure the malaise with orthodox economic policies, i.e. monetary tightening, or resort to time-honored tricks of arm-twisting companies which dare raise prices, will depend on whether Central Bank governor Kavcioglu will keep his job. Kavcioglu is instrumental in designing the myriad and distortive set of financial regulations and the implicit currency peg which substituted for rate hikes.
Turkish press claims Erdogan has offered the job to Ms Hafize Gaye Erkan, an accomplished investment banker (see resume in this link).
Her appointment could help Simsek pursue orthodox policies and signal to the markets that Erdogan indeed intends to amend his errand ways.
Various press sources, PA Turkey
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