Turkish economy in trouble
In the recent weeks, Turkey’s economic troubles came to the attention of the world’s public. In 2018, Turkish lira lost 40% of its value against the U.S. dollar and inflation hit 16%. This erodes banks’ capital and threatens to start a series of bankruptcies.
Turkey's crisis has some similarities with the 1997 Asian crisis.
But only some. In key ways the balance sheet of the Turkish banking system differs from past crisis cases.https://t.co/7ISZs1zAMb
— Brad Setser (@Brad_Setser) August 20, 2018
The root of the crisis lies in the fact that Turkish economy under President Erdoğan’s party AKP, which came to power in 2002, blossomed largely thanks to a construction boom – in late 2017, construction made up more than 18.7% of the economy. Construction companies close to AKP benefited from large-scale public projects as Turkey’s economy expanded, but at a price of growing debt, both public and private.
This long-term factor was combined with three short-term ones. Firstly, Erdoğan’s growing authoritarianism discourages foreign investment. For example, in 2017, the government seized more than 1000 companies allegedly tied to the Gülen Movement, a religious group blamed for the July 2016 coup attempt. Secondly, after the recent elections, Erdoğan formed a new government consisting of loyalists instead of experts. Economist Mehmet Şimşek was replaced by Erdoğan’s inexperienced son-in-law Berat Albayrak on the post of finance minister. Thirdly, a diplomatic row between Turkey and the U.S. has resulted in mutual sanctions.
So far, Erdoğan’s response was the same old appeal to nationalism – after asking Turks to convert their hard currency and gold into lira in early August, he blamed the crisis on Western conspirators. But without profound reforms, Turkish economy will not recover. This may lead to rising extremism and instability in an already troubled country.
Pre-election violence in Sweden
As parliamentary elections in Sweden are drawing near, leftist and progressive parties are getting nervous. Right-wing populist and eurosceptic Sweden Democrats (SD) are expected to gain a record number of votes while the current ruling coalition will probably lose a lot of seats. The SD’s agenda is based mainly on anti-immigration rhetoric, emphasis on law and order and promotion of traditional Swedish and family values. Their success is a result of growing discontent with the policies of the current government as well as trends in European politics, but also of the innovative and sharp campaign.
Against this backdrop, a what appears to be coordinated arson attacks have caught the attention of both domestic and foreign media. Violence in Sweden has been on the rise, from shootings and grenade attacks to firebombings of Jewish institutions. These crimes are often carried out by men from an immigrant background, although often living in Sweden for generations. A perceived nonrecognition of the issue by the current government fuels support for the Sweden Democrats.
The rise of the SD may lead to a post-election stalemate as in the past, all major parties refused to cooperate with SD and the possibility of a broad coalition between right and left parties has been rejected by both sides.
Merkel meets Putin
On August 18, German Chancellor Angela Merkel met with Russian President Vladimir Putin in Germany to discuss Ukraine and Syria, the hotspots of instability in the European neighbourhood. Germany has long been under pressure from the U.S., Ukraine, and the EU for its cooperative stance towards the Russian Nord Stream 2 pipeline. The Baltic Sea pipeline has a potential to cut off Ukraine from Russian gas transit and increase Germany’s dependency on Russia, potentially threatening European security. However, Germany does not seem to share the concerns of its allies, and at the meeting, both leaders agreed that they see Nord Stream 2 as a purely non-political project. Other issues were also raised, such as the need to prevent the humanitarian crisis in Idlib, Syria, to help Syrian refugees return home and to rebuild the country. In Ukraine, Merkel hopes to revitalize the Minsk peace process and disentangle the fighting parties in the Donbass region. According to Merkel, as a member of the UN Security Council, Russia has a responsibility to find solutions.
Saudi Arabia calls for death penalty for female human rights defender Israa Al-Gomgham
Saudi prosecutors have announced they are seeking a death penalty for five human rights activists, among which is a female rights activist Israa Al-Gomgham. She is facing charges related to peaceful activism. Before appearing in court in August, she was held in arbitrary detention for 32 months. Israa is a Shia activist from Qatif in Eastern province, a region which is historically home to protests and grievances by the Shia minority in the Sunni-majority Kingdom. She was arrested after participating in peaceful protests during the Arab Spring.
— Alahednews English (@AlahednewsEn) August 26, 2018
The move was described as ‘shocking’ given the recent relaxations on restrictions for women championed by the Crown Prince Mohammed bin Salman (MBS), including lifting the female driving ban. However, in May the Saudi authorities have also arrested several veteran women activists, demonstrating that the Kingdom’s support for relaxing some of the restrictions has reached its limits and only tries to appear as a modern open country from the outside.
It seems that economic liberalisation and innovation in the Kingdom comes hand in hand with increasing political oppression. While these moves can be seen as an MBS’s way to satisfy Saudi conservative establishment, some called it a ‘suicide strategy’ which will cause further instability in the long term.
Image: Istanbul, Saphire tower construction | Flickr / davidbenito (CC BY-SA 2.0)
STRATPOL Memos is a project which on a bi-weekly basis provides a short overview of the most important selected moments of Euro-Atlantic security and related areas. Our goal is to provide brief and informative comments with short analysis putting news into broader context.
Responsible editor Ondřej Zacha.
The text has not undergone language revision.