We are taught never to give up. Persevering through adversity is a lifelong maxim, where staying the difficult course in the short-term will eventually pay dividend. Despite this wisdom, sometimes it is equally valuable to admit error and correct past decisions. Failure to come to grips with reality can be deadly as it was for Captain Ahab in Moby Dick.
Nowhere is this more evident than with Turkish President Recep Tayyip Erdogan’s faltering currency strategy and antagonistic approach to the EU. Given the free fall of the Lira, logic would point to him returning to a more conformist attitude on interest rates and diplomacy. As the Turkish President is used to defying expectations, will this crisis initiate a new strategic culture and political dialogue between Ankara and the EU, or will pride cloud his decision making?
For a moment, the current economic model pursed by Erdogan focusing on cheap capital and heavy lending to boost economic growth was successful. Under this scheme he oversaw a period of sustained economic growth that included significant investments in infrastructure. The modernization of roads, airports and train networks ushered Turkey into the 21st century and made them a formidable emerging economy. Notwithstanding early signs of the economy overheating, the Turkish President resisted changing course.
The arrival of the 2015 migration crisis as well as another currency crisis in 2018 heaped pressure on to Turkey’s shaky economy that triggered a recession. The arrival of Covid and its long shelf live only injected more turmoil to Turkey’s undynamic economic model that was functioning on borrowed time. The Justice and Development Party (AKP) loss of Istanbul Mayor in 2019, should have been a rude wake-up call to take pause and assess the viability of his policies. Instead, the Turkish President remained as committed as Captain Ahab to the cause and dismissed countless governors and central bankers for disagreeing.
While his supporters have shown a remarkable commitment to stomach his alleged corrupt and undemocratic practices, economic mismanagement, and wild foreign policy adventures their patience is dwindling. The recent inflation round is particularly devastating. It has raised the costs of basic domestic goods, sidelined the purchasing of imported products, and evaporated earnings. Furthermore, Ankara is torching through foreign reserves to shore up the Lira nose diving with no end in sight.
The painful toll of these policies is not only setting the stage for a future brain drain but spurring protests in Istanbul and Ankara. Erdogan’s reference to Muslim teachings to justify his policies confirms his desperation or assuage rising discontent. Looking to the 2023 election, the Turkish President appears beatable.
Given the nightmarish domestic situation and the President’s obsession to rule, it would be prudent to at least game out the merits of reengaging with Brussels if it served his agenda. Admittedly the line of items of disagreements are long where bilateral relations have been transactional at best and openly quarrelsome at worst.
Under President Erdogan, Turkey has experienced a problematic transformational phase that has eroded its rule-of-law framework that has extended to the judiciary, media, and civil society with many of the policies steeled to the post-coup atmosphere of 2016. Turkey’s decision to withdraw from the Istanbul Convention on violence against woman was especially worrisome and totally counter to the ethos of the EU.
In October a crescendo of hostility ensued with the near expulsion of six EU ambassadors. Among them Germany and the Netherlands which respectively represents its principal trading partner and biggest source of foreign investment. As President Erdogan has promoted a country under siege from outside powers to its citizens, the EU has served as a convenient foil to blame for Turkey’s problems and punching bag to bully.
Given the acrimony, Turkey has looked to build more bridges and diversify its diplomatic and economic standings, notably with China. The post-coup era between Ankara and Beijing was recognizably productive that simultaneously proved Erdogan wasn’t isolated that fueled his foreign investment infrastructure growth model. Music to the ears of China’s Belt and Road Initiative planners.
But like most prolonged diplomatic experiences, relations have soured with Ankara vocalizing their displeasure on the Uighur issue, and Beijing responding with Turkish human rights accusation against Kurds in Syria. While China was never one to criticize the internal policies of Turkey, roping the Kurdish issue into the mainstream is a red line that President Erdogan will not budge on.
With Erdogan cornered, the revolving door of engagements could open to the EU that would help Turkey tackle major global issues like public health, migration and human security, as well as climate change.
Despite the clear strategic advantages for pursuing this path, it is hard to imagine Erdogan being first to offer concessions. By his mantra it would be interpreted as a sign of weakness. Although he did quickly resolve the 2016 diplomatic fallout with Russia given the deadly assault on Turkey’s critical tourist industry, this scenario is different.
Gravitating back to Brussels on bended knees won’t help Erdogan solve his current inflation problem and its knock-on effects. By his costs analysis keeping the EU as his personal scapegoat for domestic problems in the present, is more valuable than negotiating policy improvements for better long term EU relations.
As the quagmire he faces is self-inflicted and a product of excess hubris, it will take further crushing national pain for the President to change on interest rates and later the EU. Unlike Captain Ahab who couldn’t be saved from himself, exiting Turkey’s inflationary death spiral will eventually end through market forces. They will embarrassingly force the President to alter course and quit his delusional beliefs. Until then, its Captain Erdogan chasing a dangerous inflation game.
