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TUSIAD Turkey Letter: 3 February 2014

This week:

Economy/Energy

  • Turkey’s big rate hike to squeeze banks’ profits
  • Talking Troubled Turkey
  • Turkey Rate Increase Stems Lira Decline as Basci Defies Erdogan
  • Turks hoard dollars fearing lira rout will continue
  • Turkey’s Economy and Erdogan’s Shame

Domestic Politics

  • Erdogan accuses TUSIAD chairman of treason
  • Turkish government fights graft scandal with probe of ‘parallel state’
  • A Leader Shows Vulnerability in Turkey’s Cash Crisis
  • Media must be critical by its nature, says Turkish President Gül
  • Turkey abolishes special courts as part of new democratization move

Foreign Policy

  • German minister: keep EU door open to Turkey
  • Hollande cautiously backs Turkey’s EU bid
  • Erdogan Leads Turkey-Iran Trade Mission as U.S. Cautions
  • Israel, Turkey ‘close’ to compensation deal

Economy/Energy

Turkey’s big rate hike to squeeze banks’ profits

Turkey’s sharp interest rate hike will squeeze the profitability of its banking sector through higher funding costs and worsen the quality of bank assets, ratings agency Moody’s said on Monday.
~~~
Reuters, 3 February 2014, Turkey’s big rate hike to squeeze banks’ profits

Talking Troubled Turkey

The direct global spillovers from Turkey, with its Los Angeles-sized economy, won’t be large. But we’re hearing that dreaded word “contagion” — the kind of contagion that once caused a crisis in Thailand to spread across Asia, more recently caused a crisis in Greece to spread across Europe, and now, everyone worries, might cause Turkey’s troubles to spread across the world’s emerging markets, writes Paul Krugman of the New York Times.
~~~
New York Times, 30 January 2014, Talking Troubled Turkey

Turkey Rate Increase Stems Lira Decline as Basci Defies Erdogan

The lira swung between gains and losses as traders assessed whether a doubling of interest rates would be enough to stem capital outflows in the face of further reductions in U.S.

monetary stimulus.
~~~
Bloomberg, 29 January 2014, Turkey Rate Increase Stems Lira Decline as Basci Defies Erdogan

Turks hoard dollars fearing lira rout will continue

Turkish households and firms are hoarding dollars, suggesting they have little faith the lira will be spared a further emerging markets sell-off despite a massive rate hike this week.
~~~
Hurriyet Daily News, 31 January 2014, Turks hoard dollars fearing lira rout will continue

Turkey’s Economy and Erdogan’s Shame

At an emergency midnight session, the country’s central bank more than doubled its main weekly repurchasing rate, to 10 percent from 4.5 percent, and raised its overnight lending rate to 12 percent from 7.75 percent. In doing so, the bank finally broke Prime Minister Recep Tayyip Erdogan’s spell over monetary policy, bringing hope not just for Turkey’s ability to bring its economy back, but also for emerging markets as a whole.
~~~
Bloomberg, 29 January 2014, Turkey’s Economy and Erdogan’s Shame

Domestic Politics

Erdogan accuses TUSIAD chairman of treason

Muharrem Yilmaz, the chairman of the Turkish Industry and Business Association (TUSIAD), which has the largest share of revenue, employment and taxes paid to the state out of Turkey’s private sector, gave a speech that incensed Prime Minister Recep Tayyip Erdogan.
~~~
Al-Monitor, 27 January 2014, Erdogan accuses TUSIAD chairman of treason

Turkish government fights graft scandal with probe of ‘parallel state’

Turkey is launching a criminal investigation into an alleged “parallel state” backed by a U.S.-based cleric and accused by Prime Minister Tayyip Erdogan of orchestrating a corruption scandal to unseat him, senior Turkish officials said.
~~~
Reuters, 3 February 2014, Turkish government fights graft scandal with probe of ‘parallel state’

A Leader Shows Vulnerability in Turkey’s Cash Crisis

To some extent, Turkey and Mr. Erdogan are victims of their own success, having created an attractive investment climate that brought in billions in dollar-denominated lending, particularly after the financial crisis of 2008. Officials in Western capitals, including President Obama, came to see him as the prime example of a leader who could meld democratic values, Islam and economic prosperity.
~~~
New York Times, 31 January 2014, A Leader Shows Vulnerability in Turkey’s Cash Crisis

Media must be critical by its nature, says Turkish President Gül

President Abdullah Gül has voiced a defense of a free media, noting that the press must be critical by its very nature during a visit to Rome.
~~~
Hurriyet Daily News, 30 January 2014, Media must be critical by its nature, says Turkish President Gül

Turkey abolishes special courts as part of new democratization move

The Justice and Development Party (AKP) government is working on the content of a fourth democratization package that will abolish the infamous specially authorized courts (ÖYM) and other special courts authorized by anti-terror laws.
~~~
Hurriyet Daily News, 29 January 2014, Turkey abolishes special courts as part of new democratization move

Foreign Policy

German minister: keep EU door open to Turkey

Germany’s foreign minister says it is important to keep the European Union’s door open to Turkey following turbulence over a corruption scandal, and he’s advocating opening two new sections of its membership talks.
~~~
Washington Post, 3 January 2014, German minister: keep EU door open to Turkey

Hollande cautiously backs Turkey’s EU bid

French President Francois Hollande has cautiously backed Turkey’s aim to join the European Union despite its recent crackdown on police and judiciary and earlier French reservations about the idea.
~~~
Al-Jazeera, 27 January 2013, Hollande cautiously backs Turkey’s EU bid

Erdogan Leads Turkey-Iran Trade Mission as U.S. Cautions

Turkish Prime Minister Recep Tayyip Erdogan will travel to Tehran today as both countries seek to bolster trade and energy ties while the U.S. cautioned businesses to delay deals with Iran.
~~~
Bloomberg, 28 January 2014, Erdogan Leads Turkey-Iran Trade Mission as U.S. Cautions

Israel, Turkey ‘close’ to compensation deal

Long-lasting negotiations between Turkey and Israel over how to pay compensation and determine the amount of money to be paid to the victims of the 2010 Mavi Marmara raid are nearing completion, with the two sides nearing an agreement on the monetary figure.
~~~
Hurriyet Daily News, 3 January 2014, Israel, Turkey ‘close’ to compensation deal