In 2007-2018, Simsek was already Turkey’s finance minister and was considered a stable director, Boot says. “Erdogan therefore made a conscious choice to bring peace to the economy.”
‘Erdogan made a conscious choice to bring peace to the economy’
Erdogan has also called for a return to “rational politics,” which Boot says means Turkey’s economic policy will become less extreme. “Over the last few decades, Turkey has experienced a huge period of economic growth,” says Boot.
Unpredictable
Boot points out that Turkey is far from a developing country and could be an economic engine, but that this will be a difficult task due to the unpredictability of Erdogan’s policies and policy. “He actually wanted to neutralize the economy,” says Boot. “And it’s the opposite of what should have been done normally.”
As an example, Boot mentions the drastic reduction in interest rates at a time when the Turkish economy and also the Turkish lira were under severe pressure. The cut actually increased the pressure, after which Erdogan – in an effort not to push companies overseas or into foreign exchange – doubled interest rates, according to Boot. “For companies, this meant it was becoming increasingly difficult to obtain foreign currency,” Boot continues. “The central bank then backed up the lira, which cost the country a lot of money, and savings accounts were also guaranteed.”
Special
Boot finds savings account guarantees particularly special: they are said to be guaranteed in foreign currencies. “It might cost a lot of money, but it already cost a lot of money,” he continues. “If those savings accounts together are worth 125 billion, and the lira depreciates by another 50 per cent – which would have happened if the current policy had been implemented – it means that the government will have to deposit 125 billion lire”.
According to Boot, this would be about 12 percent of the national income, which then all has to be printed. This, in turn, fuels inflation, putting further pressure on the currency. According to Boot, there is therefore a vicious circle that could end as in Zimbabwe. “Robert Mugabe had to print money to pay his soldiers, but since he didn’t have dollars to buy ink and paper, things went badly,” concludes Boot. ‘That was almost Turkey’s economic future. And you can’t imagine that in such a developed country.”