- Erdogan dragging Turkey to precipice, opposition head says
- Kavala in prison since late 2017 without conviction
- Turkish lira has lost nearly quarter of value this year
- Polls show support for Erdogan falling ahead of 2023 elections
ISTANBUL, Oct 24 (Reuters) – President Tayyip Erdogan’s political opponents said his call to expel the ambassadors of 10 Western allies was an attempt to distract attention from Turkey’s economic difficulties, while diplomats hoped the expulsions might yet be averted.
On Saturday Erdogan said he ordered the envoys be declared ‘persona non grata’ for seeking philanthropist Osman Kavala’s release from prison. The foreign ministry has not yet carried out the president’s instruction, which would open the deepest rift with the West in Erdogan’s 19 years in power. read more
The diplomatic crisis coincides with investor worries about the Turkish lira’s fall to a record low after the central bank, under pressure from Erdogan to stimulate the economy, unexpectedly slashed interest rates by 200 points last week. read more
Kemal Kilicdaroglu, leader of the main opposition CHP, said Erdogan was “rapidly dragging the country to a precipice”.
“The reason for these moves is not to protect national interests but to create artificial reasons for the ruining of the economy,” he said on Twitter.
Kavala, a contributor to numerous civil society groups, has been in prison for four years, charged with financing nationwide protests in 2013 and with involvement in a failed coup in 2016. He denies the charges and has remained in detention while his trial continues. read more
“We’ve seen this film before. Return at once to our real agenda and the fundamental problem of this country, the economic crisis,” said opposition IYI Party deputy leader Yavuz Agiralioglu.
Erdogan said the envoys were impudent and had no right to demand Kavala’s release, stressing that the Turkish judiciary was independent.
Sinan Ulgen, chairman of Istanbul-based think tank Edam and a former Turkish diplomat, said Erdogan’s timing was incongruous as Turkey was seeking to recalibrate its foreign policy away from episodes of tension in recent years.
“I still hope that Ankara will not go through with this,” he wrote on Twitter, describing it as an unprecedented measure among NATO allies. “The foreign policy establishment is working hard to find a more acceptable formula. But time running out.”
Erdogan has not always followed through with threats.
In 2018 Erdogan said Turkey would boycott U.S. electronic goods in a dispute with Washington. Sales of the goods were unaffected. Last year, he called on Turks to boycott French goods over what he said was President Emmanuel Macron’s “anti-Islam” agenda, but did not follow through.
One diplomatic source said a decision on the envoys could be taken at Monday’s cabinet meeting and that de-escalation was possible given concerns about the potential diplomatic fallout. Erdogan has said he will meet U.S. President Joe Biden at next weekend’s G20 summit in Rome. read more
According to the Vienna Convention on Diplomatic Relations, a state may notify a country’s diplomatic mission that a staff member is unwelcome. The country may recall that person or terminate their role.
Erdogan has dominated Turkish politics for two decades but support for his ruling alliance has eroded significantly ahead of elections scheduled for 2023, partly because of sharp rises in the cost of living.
While the International Monetary Fund projects economic growth of 9% this year, inflation is more than double that and the lira has fallen 50% against the dollar since Erdogan’s last election victory in 2018.
Emre Peker, from the London-based consultancy Eurasia Group, said the threatened expulsions at a time when the economy faces “massive challenges, is at best ill-considered, and at worst a foolish gambit to bolster Erdogan’s plummeting popularity”.
“Erdogan has to project power for domestic political reasons,” he said, adding that typically countries whose envoys have been kicked out retaliate with tit-for-tat expulsions. “This stands to make for increasingly difficult relations with Washington and the EU.”
In a joint statement on Oct. 18, the ambassadors of Canada, Denmark, France, Germany, the Netherlands, Norway, Sweden, Finland, New Zealand and the United States called for a just and speedy resolution to Kavala’s case, and for his “urgent release”. They were summoned by the foreign ministry, which called the statement irresponsible.
The European Court of Human Rights called for Kavala’s immediate release two years ago, saying there was no reasonable suspicion that he had committed an offence.
Soner Cagaptay from the Washington Institute for Near East Policy, said the countries involved made up half of Turkey’s top 10 trading partners, underlining the potential setback to Erdogan’s efforts to boost the economy ahead of elections.
“Erdogan believes he can win the next Turkish elections by blaming the West for attacking Turkey — notwithstanding the sorry state of the country’s economy,” he wrote on Twitter.
Writing by Daren Butler
Editing by Dominic Evans and Giles Elgood
Our Standards: The Thomson Reuters Trust Principles.
What the Omicron variant means for the world economy – The Economist
A LITTLE MORE than a year after the first success of a covid-19 vaccine in a clinical trial, a sense of dread has struck much of the world. The Omicron variant of the coronavirus, first publicly identified on November 24th, may be able to circumvent the defences built up by vaccination or infection with covid-19. The World Health Organisation declared that Omicron poses a “very high” global risk. The boss of Moderna, a vaccine-maker, warned that existing jabs may struggle against the heavily mutated new variant. Faced with the ghastly prospect of yet more lockdowns, closed borders and nervous consumers, investors have reacted by selling shares in airlines and hotel chains. The price of oil has slumped by roughly $10 a barrel, the kind of drop often associated with a looming recession.
As we explain this week it is too early to say whether the 35 mutations on Omicron’s spike protein help make it more infectious or lethal than the dominant Delta strain. As scientists analyse the data in the coming weeks, the epidemiological picture will become clearer. But the threat of a wave of illness spreading from one country to the next is once again hanging over the world economy, amplifying three existing dangers.
The first is that tighter restrictions in the rich world will damage growth. On the news of the variant, countries scrambled to block travellers from southern Africa, where it was first identified. Israel and Japan have closed their borders entirely. Britain has imposed new quarantine requirements. The pandemic abruptly ended a freewheeling era of global travel. Restrictions were being eased this year, but the past week has shown that gates are slammed shut much faster than they are opened.
The spread of Omicron is also likely to intensify limits on free movement at home. Europe was curbing many domestic activities even before the variant arrived, in order to fight surging infections of Delta. Italy is keeping most of the unvaccinated out of indoor restaurants, Portugal requires even those who are vaccinated to have a negative test to enter a bar and Austria is in full lockdown. The long-awaited recovery of the rich world’s huge service industries, from hospitality to conferences, has just been postponed.
A lopsided economy fuels the second danger, that the variant could raise already-high inflation. This risk looms largest in America, where President Joe Biden’s excessive fiscal stimulus has overheated the economy and consumer prices rose by 6.2% in October compared with the previous year, a three-decade high. But inflation is also uncomfortably high elsewhere, at 5.3% globally, according to Bloomberg data.
You might think Omicron would lower inflation, by depressing economic activity. In fact it could do the opposite. Prices are rising in part because consumers are bingeing on goods, bunging up the world’s supply chains for everything from Christmas lights to trainers. The cost of shipping a container from the factories of Asia to America remains extraordinarily high. For overall inflation to recede, consumers need to shift spending back towards services like tourism and eating out. Omicron may delay this. The variant could also trigger more lockdowns in key manufacturing nodes such as Vietnam and Malaysia, aggravating supply glitches. And cautious workers may put off their return to the labour force, pushing up wages.
That may be one reason why Jerome Powell, the chairman of the Federal Reserve, indicated on November 30th that he favours monetary tightening. That stance is right, but brings its own dangers. The spillover effects could hurt emerging economies, which tend to suffer capital outflows and falling exchange rates when the Fed tightens.
Emerging economies have greater reserves and depend less on foreign-currency debt than they did during the Fed’s botched attempt to unwind stimulus during the taper-tantrum of 2013. Yet they must also cope with Omicron at home. Brazil, Mexico and Russia have already raised interest rates, which helps stave off inflation but may reduce growth just as another wave of infections looms. Turkey has done the opposite, cutting rates, and faces a collapsing currency as a result. More emerging economies could confront an unenviable choice.
The final danger is the least well appreciated: a slowdown in China, the world’s second-biggest economy. Not long ago it was a shining example of economic resilience against the pandemic. But today it is grappling with a debt crisis in its vast property industry, ideological campaigns against private businesses, and an unsustainable “zero-covid” policy that keeps the country isolated and submits it to draconian local lockdowns whenever cases emerge. Even as the government considers stimulating the economy, growth has dropped to about 5%. Barring the brief shock when the pandemic began, that is the lowest for about 30 years.
If Omicron turns out to be more transmissible than the earlier Delta variant, it will make China’s strategy more difficult. Since this strain travels more easily, China will have to come down even harder on each outbreak in order to eradicate it, hurting growth and disrupting supply chains. Omicron may also make China’s exit from its zero-covid policy even trickier, because the wave of infections that will inevitably result from letting the virus rip could be larger, straining the economy and the health-care system. That is especially true given China’s low levels of infection-induced immunity and questions over how well its vaccines work.
Vexing variants and worrying weeks
It is not all gloom. The world will not see a re-run of the spring of 2020, with jaw-dropping drops in GDP. People, firms and governments have adapted to the virus, meaning that the link between GDP and restrictions on movement and behaviour is one-third of what it was, says Goldman Sachs. Some vaccine-makers expect fresh data to show that today’s jabs will still prevent the most severe cases of the disease. And, if they must, firms and governments will be able to roll out new vaccines and drugs some months into 2022. Even so Omicron—or, in the future, Pi, Rho or Sigma—threatens to lower growth and raise inflation. The world has just received a rude reminder that the virus’s path to becoming an endemic disease will not be smooth. ■
This article appeared in the Leaders section of the print edition under the headline “Danger ahead”
Turkey’s Erdogan replaces finance minister amid economic turmoil – Aljazeera.com
Nureddin Nebati takes on the role of finance minister after Lutfi Elvan resigns.
Turkish President Recep Tayyip Erdogan has replaced the country’s finance minister after weeks of economic turmoil in which inflation soared as the lira plummeted to record lows.
The currency has lost more than 40 percent of its value against the US dollar this year, making it the worst-performing of all emerging market currencies.
According to a presidential decree issued near midnight on Wednesday, Erdogan accepted the resignation of Lutfi Elvan and appointed his deputy, Nureddin Nebati, as the new finance minister.
Nebati, 57, has a bachelor’s degree in public administration and a master’s degree in social sciences from Istanbul University. He also holds a doctoral degree in political science and public administration from Turkey’s Kocaeli University.
His predecessor had only been in the role since November 2020, when he was appointed after the resignation of Erdogan’s son-in-law, Berat Albayrak.
Elvan’s year-long tenure was marked by numerous crises.
Earlier on Wednesday, the Turkish Central Bank intervened in markets to prop up the nosediving lira, which has lost nearly 30 percent in value against the dollar in just a month.
Under pressure from Erdogan, Turkey’s officially independent central bank lowered its key interest rate in November for the third time in less than two months. It did so despite inflation approaching 20 percent – four times the government’s target.
Erdogan believes that high interest rates cause high inflation – the exact opposite of conventional economic thinking – and has insisted he would keep rates low.
Turkey’s currency hit yet another record low of more than 14 to the dollar before recouping some losses on Wednesday after a central bank move to sell reserves. One dollar bought 13.22 lira as of Wednesday afternoon.
The recovery, however, was short-lived after Erdogan appeared again to defend his “new economic model” against the “malice of interest”.
Since 2019, Erdogan has sacked three central bank governors who opposed his desire for lower interest rates. The president, who has blamed the lira’s troubles on foreigners sabotaging Turkey’s economy and on their supporters in the country, believes lower rates will fight inflation, boost economic growth, power exports and create jobs.
On Tuesday, figures showed Turkey’s economy had grown by 7.4 percent in the third quarter, compared with a year earlier, but some analysts believe the surge could be short-lived due to the high inflation and currency meltdown.
Meanwhile, public discontent appears to be on the rise.
Last week, demonstrators protested economic policies in the largest city of Istanbul and the capital, Ankara, while the main opposition Republican People’s Party plans a rally for early elections on Saturday in the southern city of Mersin.
Dollar recovers in face of Omicron; commodity currencies slide
The U.S. dollar recovered from a loss on Wednesday after reports the Omicron coronavirus variant is spreading and oil prices turned down, hurting commodity currencies.
The dollar index against major currencies was up 01% in the afternoon in New York after having fallen 0.3% in the morning. The greenback gained against the dollars of Canada, Australia and New Zealand and against the euro and British pound.
“What you are seeing is a classic risk-off move in FX markets and that means the dollar outperforms against the commodity currencies,” said Erik Bregar, an independent foreign exchange analyst.
The dollar lost to the Japanese yen currency, which is often seen as a safer haven, giving up 0.3% to 112.805.
The shifts underscored the hour-to-hour fragility of foreign exchange rates as traders weigh what the Omicron variant might do to plans that Federal Reserve Chair Jerome Powell signaled on Tuesday to move more quickly to raise U.S. interest rates.
The variant is becoming dominant in South Africa and has appeared in the United States.
“We’ve gotten these conflicting claims about the new variant, and Powell’s comments really threw the markets for a loop,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.
“People are still pretty nervous,” Chandler said.
The dollar’s rebound started as a report from the Institute for Supply Management came out showing that U.S. manufacturing activity picked up in November amid strong demand for goods, keeping inflation high as factories continued to struggle with pandemic-related shortages of raw materials.
An earlier report on U.S. private payrolls suggested that Friday will bring a “solid jobs report” when the government posts more comprehensive payroll numbers, Chandler said.
“Friday’s U.S. jobs data is the next big thing,” he said.
The greenback is up nearly 7% this year. November was its strongest month since June.
The euro lost 0.2% on the day to $1.1314 at 3:21 pm ET (1507 GMT).
The British pound, often considered a risk-on currency, fell back 0.2% against the dollar after having been up 0.4%. The pound is struggling to recover after reaching its lowest level in nearly a year earlier this week on fears over vaccine effectiveness against the Omicron variant.
The Australian dollar lost 0.4% to $0.7103 and the New Zealand dollar lost 0.3% to $0.6805. [AUD/]
Prior to the tailspin caused by Omicron’s advent, the main driver of exchange rates had been expectations of the different speeds at which central banks will raise interest rates.
In cryptocurrencies, bitcoin was up less than 1% at $57,220 at 3:17 pm ET (2017 GMT).
(Reporting by David Henry in New York; Additional reporting by Joice Alves and Elizabeth Howcroft in London; Editing by Jonathan Oatis and Andrea Ricci)
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