The two very different guys reached an understanding after repeated encounters. The path was paved by a thorough presentation and encouragement from the Bayraktar family.
Mehmet Simsek didn’t only use words to make his point when he visited with Turkish President Recep Tayyip Erdogan last month.
The former finance minister and economist presented all the information he had on the Turkish economy during the two-and-a-half-hour meeting.
Simsek offered the president a thorough overview of the situation of the country as he moved from one location to another.
Erdogan was uneasy during the presentation, according to three individuals who attended the meeting. The president allegedly argued that Simsek’s comments alone were sufficient.
They met numerous times between April and the Turkish elections on May 14, during which Erdogan made numerous attempts to persuade Simsek to serve as his new finance and treasury minister.
Simsek, however, remained steadfast. The veteran of previous AKP administrations, who held the position of deputy prime minister for economic and financial affairs from 2015 to 2018, called for a significant reform of Turkey’s economic structure that would directly conflict with Erdogan’s fundamentally unconventional monetary policy.
Erdogan was re-elected last month despite skyrocketing inflation thanks in part to his obsession with low interest rates and an economic strategy that depends on credit expansion, wage growth, tax forgiveness, and free gas.
Nevertheless, problems still remain. The government used a back-door method to stabilize the lira before the election, burning all the central bank reserves.
Since 2021, Erdogan has also backed the economic plan with a series of currency swaps or deposit deals with regional neighbors such as Qatar, the United Arab Emirates, Russia and Azerbaijan.
But even after the recent $5 billion deposit by an unknown foreign country, central bank reserves, including domestic borrowings from local banks, are now minus $5 billion, a record low (as of June 2) Experts fear a balance of payments crisis could occur if Turkey continues on its course.
Defending their position
Erdogan and his allies have been arguing in favor of their strategy for months, claiming that it will result in employment growth, growth, and a reduction in the trade deficit. Its protectors note joblessness dropped to 10 percent from 12% last year, and GDP posted 5% development in 2022.
However, the trade deficit reached $57.8 billion in the first five months of 2023, an increase of nearly 30% year-over-year, and inflation remained close to 40% as of May. In the meantime, Turkish exporters assert that they have lost their competitive edge, and many of them have already begun looking for alternative production locations in Egypt, where employment costs are significantly lower.
During the meeting last month, Simsek repeatedly stated that Erdogan’s foreign-funded monetary policy could not continue. Simsek uttered the idiom, “You cannot work this mill by carrying water,” implying that the economy cannot be managed with a little assistance from outsiders.