'Interest rates are decreasing but Turkey's debt is multiplying'

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After the Turkish lira's historic depreciation last week, statements came from politicians and business groups on the weekend when the markets were closed.

First, main opposition Republican People's Party (CHP) Chair Kemal Kılıçdaroğlu said he had had a phone call with Simone Kaslowski, the chair of the Turkish Business and Industry Association (TÜSİAD) and urged him to speak out.

After Kılıçdaroğlu's tweets, the TÜSİAD released a written statement on Saturday (December 18), calling on the government to "return to the generally accepted rules of the science of economy."

In response to this statement, President Recep Tayyip Erdoğan said yesterday that they will continue their low interest rate policies and accused TÜSİAD of "trying to replace the government with one that they can exploit."

Shortly after Erdoğan's remarks, the Independent Industrialists and Businessmen Association (MÜSİAD) released a statement on Twitter, announcing support for the government's "new economic model." Turkey's economy "stands firm," it said.

"The stubbornness of a single person"

Speaking to bianet about these statements and the government's economic policies, CHP Vice Chair and finance professor Lale Karabıyık said, "There is no such theory of economics."

"The economy can't be managed with the stubbornness of a single person," she said, referring to Erdoğan's low interest rate policies.

Eighty percent of the central government's debts are indexed to interest rates and foreign currencies, and 60 percent of the debt is in foreign currencies, noted Karabıyık.

"We can now see more clearly that the existing political regime and its economic infrastructure have collapsed. Every step the Central Bank takes makes Turkey worse. It lowers interest rates and the dollar rises.

"Erdoğan criticizes interest rates, but the Central Bank pays more interest for the debt it borrowed from banks. The policy rate is decreasing but Turkey's debt is multiplying.

"They are ruining the Central Bank right now. Interest rate cuts, on the one hand, more debt on the other... Just because of wrong policies, the gross debt stock of the central government has increased to 2.2 trillion lira over the past few months.

"Of course, no administration wants high interest rates; we don't want high interest rates, either. However, you don't reduce interest rates like this. First of all, you should build correct economic policies. You should elaborate and explain this very well. Then you should build a new economy on that confidence. This is only how you can reduce interest rates. If you lower interest rates without doing these, the people, all of us pay the price."

Foreign-dependency in exports

Karabıyık also dismissed the government's argument that lower interest rates are intended to increase exports.

"Turkey's exports are dependent on imports. We are foreign-dependent 70-71 percent in normal imports and 95 percent foreign-dependant in petrochemistry.

"Every interest rate cut increases costs. [They say] we will lower the interest rates, increase foreign exchange rates and exports will increase. There is no such theory of economics."

"Capital transfer from the poor to the rich"

"They have announced 24 packages since 2004. Seventeen of them were employment incentive packages and seven were economy packages. There is nothing as a result. People now know that these are lies and the government isn't to be believed and trusted.

"Half of the country is trying to make ends meet with the minimum wage. There is a capital transfer from the poor to the rich. Those who have money add more to their dollars. Other people are trying to make ends meet with their small wages.

"What matters for the people is to stockpile cheese or chickpeas before their prices increase again. People worry because they don't know whether they will be able to buy things that they can buy now. The minimum wage has supposedly increased but the purchasing power is eroding day by day. The poor who live in rental homes are getting poorer day by day."

"The only remedy is an early election"

"If we want to return from here, the only remedy is an early election. Because this government can't fix this economy. The people now see that everything was for show. A Mid-Term Plan is prepared and everything in it is the copy of the previous one.

"They have lost confidence now. Even if the economic administration takes the right steps, they are not in a position to give confidence. For this reason, a brand new government, brand new theories, brand new cadres and a return to the rule of law are needed." (HA/VK)