Garvan Walshe: Could Erdogan’s war against the financial markets be the end of him?

25 Nov

Garvan Walshe is a former National and International Security Policy Adviser to the Conservative Party

Recep Tayyip Erdogan has dominated Turkish politics for 20 years with his instrumental attitude to democratic politics.  He took on the secular military establishment created by Attaruk, with the help of liberals tired of military influence.

He then crushed the liberals by allying himself with the Gulen movement (a Sufi cult, whose leader lives in exile in Pennsylvania).

And he then turned on the Gulenists, after a coup in which he was convinced they were involved came close to ousting him, and plunging the country into civil war.

As well as the the coup, which forced him to address the nation from a mobile phone as rebel fighter jets attacked the capital, he has had a number of close poltiical shaves.

In 2015, he lost his parliamentary majority thanks to strong showing by the Kurdish HD party. But since the fractious opposition couldn’t agree on how to replace him, he won fresh elections, and assembled a majority with the help of the secular, but strongly nationalist (i.e anti-Kurdish) MH party.

A referendum in 2017 to free him from parliamentary troubles by giving Turkey an executive presidency passed narrowly with 51 per cent of the vote. But he went on to win the presidency handily with a 20 point lead over his nearest rival. The increasingly autocratic Erdogan has built himself a huge presidential palace, and imagined a vast canal west of Istanbul to rival the Bosphorus itself. Is his decidedly imperious station hoving into view?

All the same, his touch has begun to wear off. He hoped for a similar do-over when Istanbul’s 2019 mayoral election was won by an opposition candidate, Ekrem Imamoglu, by a sliver of 14,000 votes, in a city bigger than most European countries.

Erdogan leaned on the country’s supreme electoral commission to force a rerun – only to find Imamoglu’s margin swelling to 800,000. Ankara also fell to the opposition that year. His own AK party lost two of its leaders – the former foreign minister, Ali Babacan, and a former prime minister, Ahmed Davutoglu, fed up with Erdogan’s one-man rule.

Support for the ruling coalition parties now runs at 40 per cent, compared to 50 per cent for the main opposition groupings. One even put his AK, long the single largest, behind the centre-left secular, republican, CHP. The last thing Erdogan needs, one would think, is an economic crisis.

Yet he has been creating just that. Inflation was last below 10 per cent in 2016, and prices are now 40 per cent higher than they were five years ago. The currency has collapsed. In 2016, 100 lira was worth $30. Now it’s worth less than $10.

Normally, the central bank would raise rates to stem the slide, but Erdogan is against high rates, which he ascribes to a myserious “interest rate lobby”, and has fired three central bank governors who raised them. Unsurprisingly, the Lira is dropping like a stoned and ,though government debt is relatively low compared to GDP (at around 60 per cent), it needs to service its debt in foreign currency – since only the most eccentric investor would put their money into one targeted for depreciation by the country’s own president.

A saviour of sorts arrived yesterday in the form of Mohamed bin Zayed, the Crown Prince of Abu Dhabi, with which Erdogan has been trying to improve relations. Rumours of Emirati investment stopped the Lira’s descent, but sit ill with Erdogan’s talk of economic “patriotism”, and his dreams of dominating regional politics. For Turkey (pop. 84 million) to go begging to Abu Dhabi (pop. 1.5 million) does little for his patriotic dignity.

Erdogan has survived defections from his own party, the loss of Ankara and Istanbul, a hung parliament and even a coup – not least because of his utter ruthlessness.

His parliamentary loss led him to escalate a war with the Kurdish minority (and give him an excuse to imprison their party’s leader). He instituted massive purges of the civil service and army after the coup. He has kept the philanthropist, Osman Kavala in prison, after having him re=arrested, Putin-style, on new charges immediately after his old ones were quashed. The international financial markets are rather harder to tame, and the effects of his war against them are more keenly felt by ordinary Turks than, say, his occupation of northern Syria.

The next elections are set for June 2023, and the opposition fancy their chances so much that they’re calling for them to be brought forward. Erdogan once compared democracy to a train, that you get off once you have reached your final destination. While it is always too soon to write such a survivor off, the ticket inspector is approaching, and the Lira in his pocket are unlikely to cover the fare.