Turkey: Erdoğan strikes again, new central bank sacking. Great geopolitical ambitions but empty coffers

The Turkish president Recep Tayyip Erdogan he fired Oguzhan Ozbas, deputy governor of the central bank: the fourth of the seven board members since last March leaves the scene. The debt, the increase in production costs and theinflation add up to the poor performance of the lira (dropped to 10.38 in the exchange rate with the euro) contributing to worsen the financial climate of a country that, however spares no expense, such as the exorbitant ones in the infrastructure and defense sectors. More generally, compared to the past, two elements emerge: Turkey’s bankruptcy risk has been observed for years, bankruptcy but in fact it does not arrive. So the country’s geopolitical role could override the purely economic one, smoothing out the strictly financial gravity of the situation.

On the other hand, however, there is the exaggeration, mixed with exasperation, with which Erdoğan proceeds in his projects, that is the doubling of the Istanbul bridge, the huge expenses for campaigns in Libya e Syria, the new energy investigations in Cyprus, the drone dossier made in Turkey, thus putting itself sideways both to the east and to the west. Speaking of UAVs, the first mini unmanned destroyer developed from the Turkish Ares Shipyard in partnership with Meteksan Defense Industry.

Let’s start with the lira, which he lost about 14% against the dollar since the ouster of the former central bank governor Naci Agbal by Erdoğan in March. The coin also lost 55% since the beginning of 2018, when the currency crisis began to directly threaten the Bosphorus economy. It is an objective fact that many international investors have lost faith in the Erdoğan “system”, more sensitive to the leader’s wishes, and to his positioning requirements towards Moscow and Beijing, than to the laws of finance: also for this reason doubts about the ability of the central bank to act on interest rates are multiplying. Indeed the bank has kept the reference rate unchanged at 19% since Ağbal’s dismissal, because according to Erdoğan, higher rates fuel inflation rather than reduce it.

Erdoğan replaced Özbaş, who has a doctorate in financial economics from the Massachusetts Institute of Technology (MIT), with Semih Tumen, a former central bank official and economics professor who was formerly a consultant to the presidential office. A deja-vu: a technician comes out, a very faithful one enters of the magic circle. Also worthy of note is the data landscape for the central bank’s foreign exchange reserves, which fell to less 50 billion.

The opposition in Parliament, by voice of the People’s Republican Party (CHP), he repeatedly asked early elections and talk about a damage of 130 billion dollars caused by the strategies of the former Treasury and Finance Minister, Albayrak’s Weight, son-in-law of the president who resigned last November. Also for this reason Erdoğan does not intend to lose the gas consignment in Cyprus, in whose waters there are rich deposits which, however, international treaties prevent it from exploiting, given its role as squatter of northern Cyprus and on which the well-known contrast with Greece, Egypt and Israel.

But Turkey does not stand still and could drill new wells in its gas exploration work in the Eastern Mediterranean, as announced by Energy Minister Fatih Donmez. This is a controversial area where illegal search operations have provoked the reaction of Brussels, Paris, Athens and Nicosia.

Nonetheless, and net of the diplomatic crisis with the US for the purchase of the Russian missile system S400, the current geopolitical dimension delivers to Ankara room for maneuver a little wider than allowed. This is demonstrated by the space conquered by Erdoğan in Libya, the assist of Trump against the Kurds in Syria, Middle Eastern relations with Iran on which Tel Aviv keep watch. Meanwhile, the same minister announces the discovery of oil in three new onshore wells, Akoba-1 and Yenisehir-1 in the south-eastern province of Diyarbakir and in the Misinli-2 well in the north-western province of Kirklareli.

In the middle the internal jolts, like the revelations of the boss Sadat Pointer on the influence of the government in the newspapers, the poverty line for a family of four has risen to more than three times the minimum wage and the painful notes of the arrested opponents. Like the entrepreneur Kavala, behind bars for more than 1,300 days, sentenced to life in prison for allegedly helping to organize massive anti-government protests in 2013 in Park travel, when students and citizens were beaten to death by the police. 11 people died and more than 8 thousand were injured.

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