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Turkey in a week, 16th July 2018

After having been elected as a first president of the new presidential government system of Turkey, President Erdoğan has been forming the new administrative structure through the state of emergency decrees. The expectations before the elections were suggesting that after the elections the uncertainties around the new system and particularly the economic policies would at least be eased to some satisfactory degree if not disappear completely. The decrees seem to be far from decreasing the uncertainties about the new period of Turkey, on the contrary they are increasing worries and creating confusions by changing the whole administrative system by questionable decrees without any discussion at the parliament. As Hürtaş reports, the main logic of the new administrative system is that all institutions are answering only to the president. Ministries of the cabinet have changed as well along with the institutions answering to them. As ministers of the cabinet will be chosen by the president and they answer to the president, the institutions and board put under certain ministries are actually answering to the president just not directly. From the Turkish State Theatres to the State Supervisory Board and the Chief of Staff are now directly answering to the President. Putting Chief of Staff under the Defense Ministry is a crucial step for Turkey’s administrative and political history, indicating that the military is now not above the political system. Observers explain their worries about how difficult and undemocratic one person oversees wide variety of issues and take responsibilities only himself.  The cabinet members were announced last week which was expected with some worries particularly regarding the ministries overseeing economic issues. Last week the Ministry of Treasury and Finance was founded by merging Treasury and the Ministry of Finance with again a state of emergency decree. and public banks and crucial supreme boards of economic issues, expected to be independent from the political influence such as Central Bank, Banking Regulation and Supervision Agency, Capital Markets Board of Turkey and Turkish Statistical Institutions, were put under this ministry, making the ministry is the main economic body managing all economy. While this administrative change was still to be digested, it was announced that the minister for this powerful economic ministry will be Berat Albayrak, the son-in-law of the President Erdoğan. Markets did not very welcome all these news and foreign investors started to exit Turkish markets leaving Turkish Lira further depreciated, which first hit to 4.97 against dollar, then got balance around 4.85. Stocks also plummeted, and inflation soared. Turkish Lira had appreciated to the level of 4.5 against dollar after the elections, but lost value after the higher than inflation figures for June.

Berat Albayrak has tried to reassure skeptical markets amid nepotism allegations. He promised bringing inflation under 10 percent his “fundamental priority” without hinting what sort of economic policies he will follow to accomplish that. Albayrak, who had served as Erdogan’s energy minister since 2015, also told that “the independence of the central bank and its decision-making mechanisms cannot be a subject of speculation.  One of the main aims of our policies in the new period is a central bank that is effective like never before”. However, observers have expressed concerns that the president, who thinks that high interest rates are the reason for high inflation, will want to have control over his son-in-law Albayrak. Fitch and Moody’s expressed their increased worries over these developments and current state of Turkish economy. Fitch downgraded Turkey’s sovereign credit by one notch on Friday, as well as changing the outlook from stable to negative. Fitch said in the statement “In Fitch’s opinion, economic policy credibility has deteriorated in recent months and initial policy actions following elections in June have heightened uncertainty…This environment will make it hard to engineer a soft landing for the economy.”. Another rating agency Moody’s also expressed concerns particularly over central bank independency, however, they said that they will watch the economic policies the government will follow closely to decide.

Big rallies were organised for the second anniversary of the coup attempt of July 15th on Sunday. The opposition called for an open discussion at the parliament for the coup attempt. Ruling AKP and its ally Nationalist Movement Party declined this call. The opposition has insisted that the investigation for political aspect of the Fethullah Gülen Terror Organisation which has been taken responsible for the coup attempt has been avoided by President Erdoğan. The opposition maintains that the ruling party and President Erdoğan avoids this line of investigation since Erdoğan himself and his party had been too close to Fethullah Gülen Organisation once and with the help of AKP, Gülen Organisation had become very strong and resourceful in the state and further investigating political ties of Gülen Organisation would mean to harm Erdoğan himself and his party badly.


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