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A possible "economic state of emergency" has become a talking point in Turkey over the past few days.
What triggered the discussion was Twitter posts from Prof. İzzet Özgenç, a law professor close to President Recep Tayyip Erdoğan and a member of the Turkish Academy of Sciences (TÜBA), an agency affiliated with the Ministry of Industry.
"We should be prepared for the declaration of a state of emergency (as per article 199 of the Constitution) because of the seemingly inevitable grave economic depression," Özgenç wrote on Monday (December 13).
Although he later apologized because his statement was "misunderstood" and he had just "expressed concerns," the debate still continues.
Several opposition leaders reacted to his statements with İYİ (Good) Party Chair Meral Akşener saying such an intervention should never happen as it would cause the country to go bankrupt.
"How can you prevent a crisis with a SoE?"
Speaking to bianet about the issue, economist and author Mustafa Sönmez said it was about "reading intentions."
"Citizens have a severe and deep distrust of the government. There is a rising inflation. In the face of this, people convert their savings in the Turkish lira to foreign currencies to protect what they have," said Sönmez. "There are no legal obstacles to this. Banks and foreign exchange offices make transactions. This is a pretty legal and legitimate framework. How will you prevent this with a state of emergency?"
"Preventing this means abolishing foregn exchange regimes and international conventions in a very radical way. There is no need to declare a state of emergency for this," he added.
"Similarly, they can restrict foreign exchange and close foreign exchange offices. There is no need for a state of emergency for these, but none of these is a remedy, either.
"The way out of the current situation of Turkey is not practices like a state of emergency but to take steps to regain the trust of the people. For this, you should strengthen the lira. In other words, the Central Bank should give more interest to the lira, it should increase the interest rates.
"If the government refrains from this, then it should hold elections. It should ask the people for a declaration of will once again. This is what Turkey needs right now, if you'd ask me.
"If a state of emergency is discussed instead of elections, this is not related to the economy. It would serve other purposes. It would set up a framework to restrict freedom of expression, maybe to prepare for a sudden and unjust election. And this is not what Turkey needs right now."
"Everything would get out of control"
In case of a state of emergency or capital controls, everything would get out of control, Sönmez said, adding that even the rumors of a state of emergency caused further depreciation in the lira.
"[One dollar] is nearly 15 lira. The Central Bank can't intervene because it doesn't have any more reserves. What they show as the gross reserve consists of escrows, required reserves and swaps. The rest is the part of the foreign currencies that the banks collect from us, which the banks keep at the Central Bank. Since December, the Central Bank has been spending this money, but there is a problem that they need to put it back. This is a practice that reduces net reserves to negative. They must have realized that this is not working as they haven't [intervened] since yesterday."
"Turkey needs elections"
Sönmez noted that 65 percent of the deposits in banks are now foreign currencies and those who haven't yet converted their money regret that.
"There is no positive atmosphere that would dissuade those who buy foreign currencies. On the contrary, there is a negative atmosphere. The decision to be made by the FED today will strengthen the dollar as well. And if the Central Bank reduces the interest rates again, the distrust will be reinforced.
"More crucially, the inflation rate for December will be announced on January 3. It is possible that the monthly inflation rate will be 10 percent and the annual rate will be about 31 percent. In the coming months, it will increase by 10 percent monthly. The increasing inflation will crush the minimum wage.
"Then the government will borrow more from the Treasury. More treasury deficit... This will lead to another anomalies and it will be even harder to manage.
"The people's and the opposition's efforts for an early election will determine everything. The government can't escape this, which will be the right thing to do. Turkey can't overcome these issues without elections." (HA/VK)
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