January 20, 2022

Financial Fears Gain Credence as Unrest Shakes Turkey

This curious happenstance — where both fear that the profusion of glass towers and shopping malls now overwhelming the classic Istanbul skyline is not only ugly but unsustainable — underlies the convulsive uprising in Taksim Square.

The once soaring Turkish stock market has fallen about 9 percent in the past week, interest rates are on the rise and, crucially, after a period of strength, the currency, the lira, has lost 8 percent in recent months and 1 percent just since the protests began.

For more than two years, a very small subset of investors and economists has warned that, as with other economic booms built on a mountain of debt — like the property spikes in Japan in the 1980s and more recently in the United States, Spain, Ireland and other European countries — the one in Turkey would reach a painful end.

Until recently, their warnings were ignored.

In contrast to a Europe stagnating throughout most of the past decade, Turkey has grown at a 5 percent annual rate while keeping its public finances in check.

In fact, with a budget deficit that is below 2 percent of gross domestic product and overall public-sector debt of less than half its economic output, Turkey challenges powerhouse Germany for best-in-class status when it comes to these critical benchmarks of broad economic health.

For Prime Minister Recep Tayyip Erdogan, the political crisis he is facing seems manageable precisely because of Turkey’s economic success, which has buoyed a pious entrepreneurial class that forms the core of his constituency. As the protest movement has unfurled, few analysts have suggested Mr. Erdogan’s hold on power is in jeopardy, arguing that he maintains the support of the religious masses that propelled him to power.

But that dynamic could change quickly should the economy falter, as a growing number of analysts now say is possible.

Hundreds of billions of dollars of short-term loans have been flowing into the country from investors in search of higher yielding assets, financing the very malls and skyscrapers that have so dismayed the small but growing coalition of secular intellectuals, left-of-center political activists and a smattering of the professional classes.

What worries financial experts is that this so-called hot money can leave the country just as quickly as it arrived, touching off a currency crisis and, eventually, a collapse in the property markets that could threaten the nation’s banks.

“This is a classic credit boom, with money being thrown at Turkey, especially the banks,” said Tim Lee, an independent economist at Pi Economics in Greenwich, Conn., who has warned for years of a Turkish financial bubble. “At some point, though, you reach a moment when the music stops.”

It is perhaps too soon to say if that moment has come, but the financial jitters that have followed the protests have been noticeable, especially with regard to the wobbly lira.

Mr. Lee and other skeptics point to the currency as the ultimate barometer of how foreign investors see Turkey. The country’s two previous financial implosions, in 1993 and 2001, were largely currency disasters, set off by a stampede of fleeing investors and lenders.

Two points in particular concern them.

This year, for example, Turkey’s private sector will require $221 billion in outside financing alone, with most of it coming in short-term loans.

By normal standards, that is a heady sum, about 25 percent of Turkey’s G.D.P., and it is about the size of the economy of Greece, Turkey’s longtime rival.

Moreover, in preparation for the 100th anniversary of the founding of the Turkish republic in 1923, Mr. Erdogan’s government has unveiled a $400 billion public works program, which is more than half the size of the $770 billion Turkish economy.

Many of these grand projects will have a visible aesthetic effect on Istanbul, which is what infuriates the protesters.

Planners envision a third bridge spanning the Bosporus at a cost of $3 billion, for which ground has already been broken; $10 billion to be spent on a third airport, which would be the world’s largest; and a $2 billion outlay to create a financial center in Istanbul to compete with Dubai and London. On top of a slew of equally large projects in high-speed rail, subways, ports and other amenities, Istanbul is also seen as a leading contender to secure the 2020 Olympic Games.

The decision on the Games will be announced in September, and if Turkey wins, the building and borrowing will only speed up.

Article source: http://www.nytimes.com/2013/06/06/world/europe/financial-fears-as-street-unrest-shakes-turkey.html?partner=rss&emc=rss

King Abdullah of Jordan Has Criticism for All Concerned

President Mohamed Morsi of Egypt has “no depth,” King Abdullah said in an interview with the American journalist Jeffrey Goldberg, to be published this week in the Atlantic magazine. Prime Minister Recep Tayyip Erdogan of Turkey is an authoritarian who views democracy as a “bus ride,” as in, “Once I get to my stop, I am getting off,” the king said.

And he said President Bashar al-Assad of Syria is so provincial that at a social dinner he once asked the monarchs of Jordan and Morocco to explain jet lag. “He never heard of jet lag,” King Abdullah said, according to an advance copy of the magazine article.

The king’s conversations with Mr. Goldberg, an influential writer on the Middle East and an acquaintance of more than a decade, offer a rare view of the contradictory mind-set of Washington’s closest ally in the Arab world as he struggles to master the upheaval of the Arab Spring revolts. Seldom has an Arab autocrat spoken so candidly in public.

King Abdullah appears humbled and even fatigued by the many challenges he failed to foresee when he inherited the throne 14 years ago, describing himself before coronation as a “Forrest Gump” in the background of his father’s long reign. In contrast to his father, King Hussein, King Abdullah promises to move Jordan closer to a British-style constitutional monarchy, and thus to stay ahead of the Arab Spring wave.

But at the same time, he insists that only he can lead the transition to democracy, in part to ensure that democracy will not deliver power to his Islamist opponents.

The era of Arab monarchies is passing, King Abdullah said. “Where are monarchies in 50 years?” he asked.

But even his own family, with 11 siblings and half-siblings, does not yet understand the lessons of the Arab Spring for dynasties like theirs, he said, adding that the public would no longer tolerate egregious displays of excess or corruption.

“Members of my family don’t get it,” he said. “Look at some of my brothers. They believe that they’re princes, but my cousins are more princes than my brothers, and their in-laws are like — oh my God!” he continued.

“I’m always having to stop members of my family from putting lights on their guard cars,” he said. “I arrest members of my family and take their cars away from them and cut off their fuel rations and make them stop at traffic lights.”

Even his own sons should be punished if convicted of corruption, he insisted. “Everybody else is expendable in the royal family,” he said. “That is the reality of the Arab Spring that hit me.”

He blamed his own government’s secret police for blocking his efforts at political reform. For example, he charged that the secret police had conspired with conservatives in the political elite to block his attempts to open up more representation in Parliament to Palestinians, who make up more than half of Jordan’s population.

“Institutions I had trusted were just not on board,” he said, naming as an example the mukhabarat, or secret police. He said he had not realized at first how deeply “conservative elements” had become “embedded in certain institutions” such as the mukhabarat. “Two steps forward, one step back,” he added.

Stopping the Islamists from winning power was now “our major fight” across the region, he said. He repeatedly mocked the Muslim Brotherhood, the pan-Arab Islamist movement behind the largest opposition party in the Jordanian Parliament and Mr. Morsi’s governing party in Egypt, calling it “a Masonic cult” and “wolves in sheep’s clothing.” And he accused American diplomats of naïveté about their intentions.

“When you go to the State Department and talk about this, they’re like, ‘This is just the liberals talking, this is the monarch saying that the Muslim Brotherhood is deep-rooted and sinister,’ ” King Abdullah said. His job, he said, is to dissuade Westerners from the view that “the only way you can have democracy is through the Muslim Brotherhood.”

The king was also frankly dismissive of the tribal leaders from the East Bank of the Jordan River who have traditionally formed his family’s base of support. “The old dinosaurs,” he called a group of East Bank tribal leaders, including a former prime minister, before a meeting with them in the town of Karak. “It’s all about, ‘I’ll vote for this guy because I am in his tribe,’ ” the king said of their political program.

Alarmed at the violence in neighboring Syria, King Abdullah said he had offered asylum and protection to the family of President Bashar al-Assad. “They said, ‘thank you very much, but why don’t you worry about your country more than you worry about us?’ ”

“The monarchy is going to change,” the king vowed. His son will preside over “a Western-style democracy with a constitutional monarchy,” the king said, and not “the position of Bashar today.”

Article source: http://www.nytimes.com/2013/03/19/world/middleeast/king-abdullah-of-jordan-has-criticism-for-all-concerned.html?partner=rss&emc=rss