Turkish President Recep Tayyip Erdogan said the market-friendly former finance minister Mehmet Simsek is leading an overhaul of economic policy, signaling a possible shift after next month’s elections if the ruling party stays in power.
“We’re preparing to further strengthen our economic policies in the period ahead,” Erdogan said in an interview with 24 TV late Wednesday. “A team under the coordination of Mehmet Simsek, who participated in the economy’s management for years, is making preparations to that end.” However Turkish sources claim Simsek has not committed to returning to the Cabinet to head a rescue operation. According to BBC Turkey, even if he were re-appointed as economy czar, it is too late. The problem is Erdogan.
The Treasury and Finance Ministry and central bank are also making preparations, Erdogan said. “God willing, after elections we will bring all of them together and continue our path by fortifying our economy policy.”
On the other hand, BBC reported: Mehmet Şimşek is mentioned as the next name to head the new economy administration, as an election promise of AKP. Mehmet Şimşek, the former deputy prime minister and finance minister, first appeared as the person AKP plans to appoint in the news of Reuters.
Later, Şimşek met with President Erdogan at the AKP Headquarters; After this meeting, he announced that he did not intend to return to politics. However, in an interview this week, President Recep Tayyip Erdogan mentioned Şimşek’s name again. It is not known whether Mehmet Şimşek has accepted this offer yet.
Commenting on Şimşek, who resigned from his post in 2018, the respect of foreign investors in the past years made him stand out in his election strategy.
Emerging markets expert Timothy Ash said: “This shows that the election race is very close and that Erdogan is indeed closer to losing, so he is trying to win every single vote.”
Erdogan is thus working to get moderate, pro-market AKP voters to vote for the party again, according to Ash of London-based asset management firm BlueBay Capital.
“Ministers are now just bridges”
On the other hand, according to investors, the name Şimşek is unlikely to instill confidence to the markets again. It is possible to see this in the fact that the markets have not reacted since the first appearance of Şimşek’s name.
Investor Dr. Altuğ Özaslan says that it is normal that “respectable names come to the fore again today, in order to link election promises to past achievements”. “The reason for every mistake made today is that the economic policy is managed by the president,” said Özaslan. The ministers used to be executives in the pre-presidential system, but today they only act as a bridge: “For example, the minister of economy currently serves as a bridge between capital markets, companies, the real sector and the presidency.”
Simsek proponent of free market economy
Şimşek is seen as a name who advocates free market economy rules and orthodox economic policies. Among the orthodox policies, which can be defined as the generally accepted rules of economics, there is also the rule that interest rates should be increased to combat high inflation.
However, President Erdogan has adopted an unorthodox economic policy for a long time, saying, “High interest rates lead to high inflation”.
The bitter fate of Naci Ağbal
Investors say that Şimşek’s appointment will not mean a return to orthodox policies, and that is why the markets did not react. “The market does not extend credit to those who make the same mistake all the time,” states Özaslan, citing the example of Naci Ağbal.
Naci Ağbal was appointed as the head of the Central Bank on November 6, 2020. However, he was dismissed within five months. Ağbal had increased the interest rate from 10.25 percent to 15 percent at the first Monetary Policy Committee meeting held after he took office. Before the end of 2020, the interest rate was increased to 17%. Ağbal was dismissed on March 19, 2021, just after the rate was raised to 19 percent.
“It’s too late now”
Emre Akçakmak, an investment consultant from East Capital company in Dubai, comments on the mention of Şimşek, “At the point where the economy has definitely entered the proverbial dire straits, Erdogan may be looking for a way out.”
However, pointing to what happened to Şimşek and Ağbal, Akçakmak says, “Since ministers are deprived of their powers, investors now focus on the functioning of the system and the economic policies produced, not on the individuals.”
According to economist Timothy Ash, it is too late for Şimşek to make a difference “No one thinks that Erdogan will grant Şimşek the authority to make economic decisions. No one believes that Erdogan will return to orthodox policies after the elections.”
Source: BBC, Mehmet Şimşek, AKP’nin ekonomi politikaları için kurtarıcı olabilir mi?
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