Monday

4th Jul 2022

Erdogan picks EU fight, as Turkish economy tanks

  • Falling popularity and wobbly economy, as Turkish president Recep Tayyip Erdogan seeks 'scapegoats' (Photo: Wikipedia)

Turkey's president has railed against the EU and continued to escalate a gas-drilling dispute, amid dire predictions for the Turkish economy.

Recep Tayyip Erdogan said Europe had failed to help Turkey take care of Syrian refugees or to make good on accession promises to Balkan states.

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"We forestalled many humanitarian tragedies in the Aegean [sea] and prevented the irregular [border] crossings to Europe ... But we did not see the support and humanitarian approach we expected from our European friends during this difficult process," he said at a summit in Sarajevo on Monday (8 July).

The EU had paid out just €2.5bn of a promised €6bn on refugee aid, leaving Turkey alone to "carry the burden", Erdogan added.

"Recently, some short-sighted populist circles have blocked EU enlargement policy," he also said, referring to an EU decision to put off accession talks with Albania and North Macedonia,

"Negative trends toward division and discrimination have spread across the continent and endanger not only internal peace within the EU but the hope and potential of the [Balkans] region," he added.

Erdogan spoke as two Turkish ships drilled for gas in disputed waters near EU member Cyprus, with France, Greece, and the US urging him to call off the operations also on Monday.

He also spoke after his bodyguards clashed with Bosnian airport police when they refused to hand over their guns, in an incident seen as a sign of Turkish arrogance by some.

"They [Erdogan's bodyguards] were aggressive and behaved as if they were in their own country ... They did not respect our laws and deserved to be arrested," Zoran Galic, a Bosnian police chief, told press.

"We call on Turkey to avoid any action that would be unlawful and could jeopardise regional stability," the French foreign ministry said on the gas dispute,

"We urge Turkish authorities to halt these operations and encourage all parties to act with restraint and refrain from actions that increase tensions in the region," the US state department added.

The EU has threatened sanctions against Turkey if the drilling goes on, which could see cuts in EU aid and a freeze on European Investment Bank lending.

The US has also threatened sanctions in a separate dispute over Turkey's recent decision to buy Russian missile systems.

Erdogan's disputes with his Western allies come amid dire predictions for the Turkish economy, with some financial analysts saying that he is looking for "scapegoats" for internal problems.

The disputes also come amid his falling popularity - an opposition party recently won mayoral elections in Istanbul and some of Erdogan's former allies, such as Ali Babacan, his former economy minister, have split off to form their own political party.

For its part, Moody's, the US-based ratings agency, junked Turkey's debt rating further on Monday in a complaint on Erdogan's one-man style of rule.

Bank chief fired

Turkey remained "highly vulnerable to a further prolonged period of acute economic and financial volatility," it said in a statement after Erdogan fired his central bank chief on Saturday.

"The sanctions which the US congress will consider ... cast a further shadow over Turkey's economy and financial system," Moody's said.

It blamed the vulnerability on Erdogan's bullying of the central bank to perk up economic growth instead of letting it deal with long-term problems, such as stabilising Turkey's banks.

Erdogan, last year, also appointed his son-in-law as finance minister, shaking confidence in the country's financial architecture.

The Turkish president defended his actions on Monday, saying: "He [the former central bank head] did not inspire confidence in markets. His communication with markets was not good".

Crisis foretold

But Ashmore Group, a London-based asset management firm, said Turkey could go the way of Venezuela in terms of economic collapse if Erdogan continued to interfere in fiscal policy.

"The government ... blames other groups instead of itself, because this works politically, but it only makes investors and businesses even more worried, as Erdogan will need more and more scapegoats as the economy worsens," the company's Jan Dehn said.

Businesses will soon "take action to defend their wealth and livelihoods - this results in capital flight, declining investment, and other hedging strategies", he added.

But that is likely to see Erdogan counter-attack with "capital controls, nationalisation, forced conversion of contracts to lira from euro" and "eventually the government has no financing, no growth, no future and plunges into a big crisis", he also said.

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