Erdogan – The “new economic model” is a trap for the Turks


The “new economic model” of Tayyip Erdogan was not invented at the weekend nor was it announced for the first time known on Monday. Tuesday, however, was the day the pound experienced the largest daily boost ever recorded, at almost 25%.

The picture, in fact, becomes even more impressive if one considers the “bleeding” of recent weeks. After all, from the beginning of the year until December 21, the Turkish currency has lost 55% of its value – with 40% corresponding to just the last month.

So what was it that Erdogan said Monday night after the cabinet meeting that persuaded markets and investors to change their stance and support the pound en masse? And what makes his close associates argue that, sooner or later, the Turks will take dollars and euros out of their coffers and convert them into pounds?

State guarantee for losses

The question may seem complicated, but the answer is clear: The Turkish president has said that citizens, businesses and banks are no longer afraid of the consequences of further devaluations of the pound, as the state takes on a guarantor and compensates them in full for their losses. .

This is, in essence, the culmination of monetary policy intervention by the central bank, which, in theory and based on classical economic theory, should be independent. It comes as a result of Erdogan’s repeated blackmail, which has resulted in the continuation of the process of lowering interest rates – while those who disagreed with him simply went home.

Things, however, are not so simple. It is not a given that he will show the patience he asked from his fellow citizens, promising that better days will come and that they will reap the fruits of the tree of “strong Turkey”. Especially as inflation rises to 21% and is sure to rise further, poverty is sweeping, the table is becoming increasingly difficult and loans are becoming virtually impossible to service – while a 50% increase in the minimum wage is lenient insufficient.

The bill to the taxpayers

After all, one does not need to be an expert to understand that the “state” that guarantees the coverage of any losses is, after all, nothing more than the taxpayers themselves, who will be called upon to shoulder the relevant bill. Which, among other things, may lead to restrictions on the movement of capital or even violent “seizures” of piggy banks, invoking patriotic duty.

It is noted that Erdogan reiterated yesterday that he has declared war on markets, speculators, capital and rating agencies, accusing them of taking advantage of the pain of the Turkish people and wanting to “suck their blood”. Trying, thus, to give an… anti-imperialist tone to his proclamations and to strike a sensitive nerve of society.

At the same time, however, he clarified that both he and the AKP government remain faithful to the rules of the free economy and the open market. And that means, in practice, that he is trying to square the circle – something he is unlikely to achieve, since the classic “or pope, pope or couple, couple” applies in this case as well.

Square squaring or redistribution?

Perhaps, then, what is needed to judge Erdogan’s last “roll” is more common sense and less the analysts’ estimates, most of whom speak of a “great and dangerous risk.”

It is obvious, after all, that the Turkish funds do not have the money today to support the guarantees offered by Erdogan, as denounced by the leader of the official opposition, Kemal Kilincdaroglu. A solution could only be found if the president and the AKP decided to proceed with a brave redistribution in favor of the “bottom” of the enormous wealth that has accumulated in the “top” in the two decades of rapid growth.

Only this is not going to happen. Neither from Erdogan, who respects the rules of a free economy, nor from Kilincdaroglu, who advocates a return to economic and monetary “normality”, which implies bloody austerity.

Blackmail to foreigners

So based on all this, those who claim that the guarantees given by Erdogan are an attempt to save time may not be wrong. And at the same time, an (still) indirect but very clear blackmail to Turkey’s foreign creditors and banks which have “openings” of tens of billions in its market. If you do not support me, we will all fall together! So simple…  

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