In his decade long rule of the country, Mr Erdogan has
presided over decreasing inflation and increasing economic growth rates. One of
the positive effects of these have been the decreasing interest rates by which
Turkey is able to borrow in international markets. Concomitantly, Turkey has
reversed its debtor relationship with the IMF and is now planning to increase
its contribution to the IMF. These improvements have been recognized by
upgrades on Turkey's credit rating, the last of which happened shortly before
the Gezi Park protests and reinforced Turkey's investment grade status.
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| Gezi Park near Taksim Square. By Yinyerale [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons |
The Gezi Park protests started small but turned into
country-wide protests after the brutal police crackdown on protester campers in
Gezi Park. As protests have widened to Ankara and other cities, the PM has
called protesters “chapulcu” [riff raff]. However, the protesters have shown
resilience against the excessive use of tear gas, water cannons and rubber
bullets. Many commentators have seen this resilience as the manifestation of
pent-up anger against Mr Erdogan's increasingly dictating and polarizing voice
on different matters such as abortion rules, regulation of alcohol consumption,
refusal to grant place of worship status to Cemevi- Alewites' place of worship,
and rebuilding Topcu Barracks as a mall at the expense of Gezi Park, one of the
few remaining greenery in urban Istanbul.
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| Taksim Military Barracks — in Istanbul. Demolished in 1939 (Public Domain, https://commons.wikimedia.org/wiki/File:Taksim_kislasi.jpg#filelinks) |
The PM's rhetoric, which for many is
combative and condescending, has not helped. As one commentator put it, this is
a protest movement among urbanites to restore their dignity in the face of PM's
actions and words.
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Protesters at Taksim Square. By Fleshstorm (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons
|
It is in these circumstances, the PM has led the
discursive counter attack on the protesters by calling them mere tools in the
hands of “the interest lobby”. In Mr Erdogan's narrow usage of the phrase, the
interest lobby simply refers to a group of national and international actors
who strive to increase the fee on the loans given to Turkey. This phrase is not
a new tool in Mr Erdogan's rhetorical arsenal. Mr Erdogan and his close
circles, which include rising columnists and media tycoons, have repeatedly
argued that Mr Erdogan's political and economic success has been at the expense
of this lobby.
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| Riot Police clearing the square 15 June 2013 By Mstyslav Chernov (Self-photographed, http://mstyslav-chernov.com/) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons |
Although finance capital is expected to seek higher
returns, risk is the reverse side of the coin. Simply put, the interest rate by
which a country borrows in international markets is determined by a plethora of
risk factors such as local inflation rate, global economic prospects influencing
the circulation of finance capital, and debtor country's growth prospects and
political stability signalling its ability to pay back loans. One cannot rule
out foul play in international markets as recent LIBOR fixing scandal has
demonstrated. Nevertheless, such scandals and the underpinning opportunistic
behaviour cannot explain everything in the markets.
So what has happened in the Turkish markets during the
Gezi protests? The stock market went down by more than 10 per cent after the
PM's stern dismissal of the protesters and their demands. The benchmark
interest rate spiked by more than 2 per cent and the default insurance premiums
on the Turkish debt went up by more than 60 basis points to 183. In the
process, it is claimed that several billion US dollars have exited the Turkish
stock and bond market. For the PM and his supporters, these were the signs that
the interest lobby decided to destabilize the Turkish economy not just to earn
higher interest fees but also to thwart the rise of Mr Erdogan and Turkey to
global power status. Nevertheless, in the weeks preceding the protests, the
developed and emerging country stock markets have been jittery because the
signs that the US and Japanese central banks might reverse their monetary
expansion policies have got stronger. The prospect of such a reversal has led
to sellings in the stock markets including the Turkish one which have benefited
from the monetary expansion policies and negative interest rates. The Gezi Park
protests in Turkey and the government's reaction have exacerbated the downward
momentum in the Turkish assets. Nevertheless, the stock market has recouped
most of its losses and the benchmark interest rates and the default risk
premium on Turkey have loosened down as the protesters and the PM have started
dialogue on how to resolve the issue peacefully.
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| In the early days of the protests, the Turkish stock market fell by more than 10 per cent. Picture by Katrina.Tuliao (https://www.tradergroup.org) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons |
If there had been an intent on the part of the
interest lobby to topple Mr Erdogan by causing social, economic and financial
mayhem, it seems like the lobby has decided to stop playing their part in the
financial realm without a reason. The PM and his supporters argue that it has
been their uncompromising determination to stay in government and fight any international
conspiracy that has scared the interest lobby. Yet, so far there has been no
investigation from the Turkish financial regulators on any local or
international financial actor **. On the other hand, the Turkish economy has been
and will be vulnerable to change of sentiments in international markets mainly
because of its low savings rate (one of the lowest across emerging markets) and
its dependence on foreign capital to reach its target of becoming a high income
country in the next 10 years. Such dependency on foreign capital has actually
made the Turkish investors more sensitive to global economic events than
domestic economic agenda. In this context, increasing the crackdown rhetoric on
foreign capital would add unnecessary
strain on Turkey's ability to borrow in international markets and make things
worse for Mr Erdogan's rule.
For long Mr Erdogan's rhetoric of being the victim-
turned-hero who can advance Turkey beyond a military tutelage has helped his
popularity among the masses. Now that Mr Erdogan seems to have harnessed most
of the branches of state authority, he turns to shadowy rhetorical figures such
as the interest lobby to explain the growing national discontent with his
polarizing rule and reinforce his rank and file.
** SPK- Capital Markets Board of Turkey actually started an
investigation into foreign investors and their local brokers at the end of June
2013, requesting detailed documentation from the latter . According to a recent news report in Hurriyet, a national newspaper, the investigation was still on at the end of
2013 owing to the CMB's data requests from foreign capital market regulators. According
to undisclosed CMB sources cited in the news report, the investigation is not
expected to produce any conclusive evidence of market manipulation on the part
of foreigners and their local brokers. http://www.hurriyet.com.tr/ekonomi/25467161.asp
(In Turkish)
