Turkey’s Plan for Economy Is Seen as Tepid Response to Downturn – The New York Times

The Turkish government unveiled a plan on Wednesday to help the country’s banks survive an epidemic of bad loans, but it dashed hopes for more sweeping measures to address an economic downturn that has become a threat to President Recep Tayyip Erdogan’s hold on power.

Under the proposal, which the government described as a comprehensive plan for the economy, state-owned banks will receive $5 billion in aid, about a third of the total amount of bad loans, according to official figures.

But economists said the blueprint, which was presented by Berat Albayrak, the minister of treasury and finance, who is also Mr. Erdogan’s son-in-law, seemed designed mostly to protect Mr. Erdogan’s allies in the construction and energy sectors. The plan offered only bromides in response to a deepening recession, double-digit unemployment and prices rising at a 20 percent clip.

The teetering economy helped cost the president’s party its control of Ankara in local elections last month, and delivered a victory to opposition parties in Istanbul, although Mr. Erdogan is challenging the results.

Despite the setbacks, Mr. Erdogan apparently remains unwilling to forsake the debt-fueled growth that lifted the country from poverty but has become increasingly unsustainable. Facing a possible rematch in Istanbul, he is probably also wary of forcing voters to swallow the bitter medicine of cutbacks and austerity needed to cure Turkey’s dependence on credit.

“Those who were expecting a framework to solve the issues in the economy after the elections should be dismayed,” said Ugur Gurses, a former banker who is now an economics columnist. “All that is planned is to keep the credit flowing from state-owned banks.”

The economy has been central to the expansion of Mr. Erdogan’s authority during the last two decades, but as growth has wavered, so has his support. Foreign credit has dried up as lenders lost confidence in his management of the economy, causing widespread bankruptcies among businesses unable to refinance debt that they must often repay in increasingly expensive dollars.

But Mr. Erdogan has refused to heed cries from the business community for more extensive changes in policy, and has ignored the advice of mainstream economists. Instead, he has behaved as if he could make the economy bend to his will, and blamed economic problems on foreign conspiracies.

The plan presented Wednesday by Mr. Albayrak failed to address the problem that most bothers the Turkish business community: government agencies and courts that are increasingly tilted in favor of Mr. Erdogan’s loyalists, and opaque decision making.

“It’s not clear how administration is run, and who does what,” said Atilla Yesilada, Turkey analyst at GlobalSource Partners, a research firm. “Who makes policy is not clear at all. That’s what I hear time after time.”

During a 40-minute presentation in Istanbul before an audience of journalists, who were not given a chance to ask questions, Mr. Albayrak said that the government would increase taxes on the rich, cut taxes for corporations, encourage people to save and take measures to stabilize the country’s pension system by making it compulsory for all Turks.

He also said the government would create a “National Unity in Agriculture Project” to combat runaway food price inflation. But there were few details on how that and the other measures would work.

At least this latest economic plan landed with less of a thud than the last one. That program, presented by Mr. Albayrak in August, was regarded as so unconvincing by foreign investors that they dumped the lira and provoked a currency crisis. For a brief period, it took almost 7 lira to buy $1, a low. The lira was worth about $5.70 Wednesday, little changed from Tuesday.

The timing of the economic plan created a political quandary for Mr. Erdogan and his party. There was intense pressure for the government to regain international credibility by presenting a serious program.

But tough economic polices might further alienate voters and hurt Mr. Erdogan’s chances of retaining power in Istanbul by forcing a repeat election.

“For financial stability, more determined measures were expected,” said Bahadir Ozgur, an economic analyst and columnist for the online newspaper Gazete Duvar. “In this program, there is nothing curbing budget spending and disciplining public finance.”