Even dictators are no match for the financial markets. And that’s good news if you can ignore the acute dangers posed by Turkey’s crisis. But these markets, which are so often criticized for their irrationality and amorality, might eventually force Recep Tayyip Erdogan to political and economic reason. His country’s great dependence on foreign capital is making the strong man from Ankara appear weak.
It would be easy — and even understandable — to indulge in schadenfreude toward the “Turkish Sultan.” After all, in recent years he cracked down on opponents and jailed journalists; he showed contempt for the separation of powers and forced all his country’s institutions into line. For Erdogan, democracy has always been a means to an end. The end was more power at the cost of a hollowed-out democracy — except for the façade of elections.
Nevertheless, hostility would be out of place. Too much is at stake from the West’s point of view: Turkey is a large buffer between Europe and a crisis-ridden, war-torn Middle East. It has the second-largest army in NATO. For many years, the country was considered proof that Islam and democracy are indeed compatible and that the modernization of a Muslim nation in the Western sense is possible. Not to mention that Turkey is an economic heavyweight: If the country with its 80 million inhabitants were part of the European Union, it would be the seventh-largest economy with a GDP of €650 billion. The risk of infecting other emerging countries is massive, as made clear by the stock and currency markets.
Today Turkey, a nation that only 15 years ago was considered one of the most promising among emerging countries, stands on the brink of an abyss — and Erdogan only is to blame. Not only did he frighten off investors with his dictatorial behavior, but he demoted the country’s once-independent central bank to serve him. This was a fatal move for a country with a chronically high current-account deficit. The almighty president initiated a credit-financed stimulus program that boosted the economy, but economists knew then it would be nothing more than a flash in the pan.
A stable Turkey is in Europe’s interest
Further, since US President Donald Trump made clear he is ready to tussle with Erdogan, starting with punitive tariffs, the Turkish leader finds himself in an almost hopeless situation. If he raises interest rates to stem the outflow of capital, the Turkish economy will slide into a recession. If he continues the course and expands monetary policy, the lira’s decline will continue. Even capital controls won’t be able to save Erdogan. His appeal to citizens that they should convert their savings, often held in euros or dollars, into their domestic currency, is nothing more than an act of desperation in a country suffering under double-digit inflation rates.
But those days are over. Erdogan was weak when tempted with absolute power. And for Europe and Germany, a new question arises: How to deal with a dictator who is at risk of falling? In fact, this crisis presents opportunities of its own: Europe could offer Turkey loans. The IMF will most likely stay out of the picture because of America’s resistance and, anyway, Erdogan wouldn’t want to receive dictates from the US-dominated institution. However, the offer must only be given if Erdogan makes clear political concessions.
Turkey deserves support because it is more than Erdogan. Plus, a stable, cosmopolitan Turkey is of fundamental interest to Europe. Not because of the controversial refugee deal between Brussels and Ankara, but because Turkey is a key state between the Orient and Occident. The irony of history: The markets are great allies in the fight for a liberal-minded Turkey. “Democracy is the train we take until we reach our goal,” Erdogan said before he took power. The truth is: Without democracy, the train comes to a halt.
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