In March 2015, Turkish President Recep Tayyip Erdoğan urged his fellow citizens not to invest in US dollars at a time when the Turkish lira was losing a significant amount of value, saying people who exchanged their lira for dollars would regret it, and soon.
The lira had plunged from 2.28 to the dollar to 2.98 in the first three months of that year.
Erdoğan was blaming the “interest rate lobby,” a shadowy, villainous group that aimed to force the Turkish Central Bank to raise interest rates, according to his populist rhetoric, because one of the very few responses to the low valuation of the Turkish lira would be a hike in interest rates. So basically, Erdoğan thought that some financial actors were playing with the value of the lira in an attempt to raise rates.
One month later, on April 18, 2015, he admitted that the country had been experiencing economic “inertia” and added that Turkey would overcome the situation as it had before in 2008, when a global financial crisis affected emerging markets.
Those days, he repeatedly urged Turks to exchange their dollars for lira in order to prevent continuous losses in the value of the national currency.
However nothing could stop it. The lira’s valuation against the dollar remained at over 3 in 2016, and it was more than 3.54 on the first business day of the next year after a coup attempt was foiled on July 15, 2016. Most people were expecting a more stable economy when Erdoğan narrowly won a referendum in April 2017 that introduced an executive presidency as the Turkish system of governance.
Yet another election was on the horizon, as Erdoğan called snap presidential and parliamentary elections in April of this year, a surprise for some as they were originally scheduled for November 2019.
The reasoning was quiet clear, though.
“I’m seeing June 24 [the date of snap elections] as a preparation for an earthquake. We will be preparing ourselves for the devastating effects of the earthquake,” Erdoğan said on April 20, referring to the serious economic problems apparently on the way.
An early election would secure another Erdoğan win if it was scheduled before the much-anticipated economic crisis.
In May, Erdoğan went to London to meet with global investors and revealed his intention to tighten his grip on economy management and to lower interest rates, two significant economic policies that financial circles did not want to hear.
As a result the lira started a free fall in May, causing the central bank to raise interest rates and then-Deputy Prime Minister and economy chief Mehmet Şimşek to pay a visit to London to dial back Erdoğan’s remarks.
Apparently Erdoğan had known a crisis was in the offing since 2015 and mentioned it frequently, but as a master of rhetoric, he needed an external enemy to blame, a pretext by which he could cover up his poor management of the economy and the cost of his authoritarian rule.
In 2008, even though Turkey had suffered from the global financial crisis, he famously said that “the crisis only touched us slightly.” The effect of the crisis actually might have been seen in the local elections held a year later in which Erdoğan’s party only garnered 38 percent of the vote, 3 percent less than previous election successes.
In 2013, when a wide-ranging police investigation into bribery and corruption among his close circle was launched, Erdoğan invented “the parallel state” rhetoric to put the blame on the Gülen movement, as some bureaucrats involved in the case were affiliated with the movement.
A coup attempt on July 15, 2016 paved the way for an executive presidency, through a controversial win in referendum. It was a “blessing from God,” as Erdoğan put it.
While the Turkish lira reached 7.20 to the US dollar in August, this time Erdoğan’s excuse was an American pastor, Andrew Brunson, who was put under house arrest by a Turkish court after almost two years of pretrial detention on “terrorism” charges.
After the court decision to move the cleric from prison, the US administration sanctioned two Turkish ministers and revealed that further sanctions were on the way if Brunson were not released.
The Erdoğan government called it an “economic attack.” As part of a diplomatic maneuver, Turkey moved closer to European countries and secured their support, while pleasing them with the release of their “hostages,” such as two Greek soldiers who were arrested by a Turkish court for crossing the border illegally. Since the greatest share of Turkey’s debts to global lenders belongs to European banks, they are eager to see financial stability in Turkey.
Yet the Turkish lira’s value against foreign currencies, especially the dollar, is like a barometer showing the exact nature of the Erdoğan regime’s inability to govern the country.
Band-Aids probably won’t work.