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For a day there has been speculation in Turkey about a new economic policy and power struggles in the presidential palace. Meanwhile, the lyre is having its best day in two years.
Berat Albayrak has resigned from her post as Turkish Finance Minister. The photo shows him at the opening in July 2018.
Although President Erdogan is silent on the resignation of his son-in-law, Finance Minister Berat Albayrak, there is already one certainty in Turkey: the markets would be happy with a change in the Finance Ministry. After the fall of recent weeks, the Turkish national currency had its best day in two years on Monday, gaining 5.45% against the dollar.
Turkish media tragedy
Albayrak, who is married to Erdogan’s eldest daughter Esra, shockingly announced his retirement from politics on Sunday night and presented health reasons. More obvious, however, is a connection to the currency crisis in Turkey and resentments within the presidential palace. Since the beginning of the year, the lira has lost more than a third of its value against the main currencies, inflation is almost 12%, double the target figure.
The resignation announcement was made in an unconventional way in a hastily drafted letter on the social media platform Instagram. At the same time, Albayrak’s Twitter account was deactivated. Therefore, at first there were suspicions that hackers had played a trick on the extremely unpopular minister. But over the course of Sunday night, the Finance Ministry spokesman confirmed the resignation to journalists, at least those who asked.
All outlets close to the government, with one exception, have yet to mention the one-syllable resignation, a clear sign that a signal is being awaited from the presidential palace on how the incident should be classified. The matter is also an illustrative example of the sorry state of the Turkish media landscape. In the midst of a serious economic crisis, an event of fundamental importance out of consideration for sensitivities in the presidential palace is silenced until further notice.
Power struggle in the inner circle
Albayrak had been one of Erdogan’s most loyal followers in the cabinet. Despite great doubts about his suitability as Minister of Finance, which went very far in the field of government, he had a relatively strong position thanks to his family ties to the Head of State and, together with Minister of the Interior Soylu, was one of the candidates for successor to the president.
Hardline Soylu always had a bigger power base. When he announced his resignation in April due to a misguided action by the Crown, calls immediately surfaced on social media for Soylu to remain in office. Erdogan was almost forced to reject the resignation.
As the markets show, reactions to Albayrak’s announcement could not have been more opposite. However, it is still unclear whether the president will not ask Albayrak to stay as well. Erdogan is known to dislike being presented with a fait accompli and generally dismisses ministers himself rather than accepting their resignations.
Regardless, the Finance Minister camp will emerge from the current weakened turmoil in the struggle for influence in the inner circle of power. The head of the German Marshall Funds think tank in Ankara, Özgür Ünlühisarcikli, therefore assumes that further changes in the power structure will follow.
From son-in-law to son-in-law
Albayrak’s resignation is the biggest, but not the only impact on Turkish economic policy in recent days. President Erdogan also replaced the head of the central bank on Saturday night with Albayrak’s predecessor as Finance Minister Naci Agbal. According to media reports, Albayrak had not been consulted prior to this move, which is cited as the reason for the resignation. Agbal said on Monday that the central bank would use all means at its disposal to fight inflation. In this you can see the willingness to move away from the previous low interest rate policy that drove the lira down.
Developments beyond national borders are likely to play a role in this. The outcome of the US elections has increased the economic pressure on Turkey to act. It is widely believed that a Joe Biden government will take a tougher line with Ankara in both the dispute over the Russian S-400 weapons system and the matter over the Turkish state Halkbank, which is said to have been used to circumvent sanctions against Iran. which inevitably meant more difficulties for Turkey.
The fact that no punitive action has been taken thus far is largely attributed to Albayrak’s good relationship with Jared Kushner, son-in-law to son-in-law to some extent. This is one of the reasons why Albayrak’s position is now weakened.
Albayrak is not the only scapegoat
For these reasons, the departure of Albayrak, who always seemed overwhelmed in his role as finance minister, may well represent a new beginning. But he is not the only scapegoat for grievances in the Turkish economy. In the presidential system, which is completely geared towards Erdogan, all important decisions are made by the state president, including economic policy.
The devastating low interest rate policy dates back to Erdogan, who continues to refer to high interest rates as the “mother of all evils.” It is not certain that the new central bank governor will be given the scope for tighter monetary policy in order to stabilize the currency and control inflation, especially as this would likely go hand in hand with a recession. His predecessor in office, Murat Cetinkaya, was dismissed in July 2019 for precisely this reason.
