Turkey votes: between financial crisis and diplomatic tensions

Turkey votes: between financial crisis and diplomatic tensions

Giuseppe Acconcia | Journalist focusing on the Middle East
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The country is approaching the deciding constitutional referendum to be held on April 16, 2017, in a difficult context in which foreign investments and tourist flows have dropped, while inflation rates are high

On April 16, 2017, Turkish citizens are called to cast their vote in a major constitutional referendum. In the event of a ''Yes'' victory, the powers of the President of the Republic will be extended, who would have the last word on the constitution of future executives and would choose half of the constitutional judges, and obtain the extension of his eligibility for another two terms. However, the vote takes place in a context of uncertainty in economic policy and serious bilateral diplomatic crises between Turkey and certain European countries. The severe terrorist attacks in recent months have led to a drop in foreign investments and have lowered expectations for economic growth recorded in recent years.

Constitutional referendum and economic policy

#Turkey is approaching the deciding #constitutional referendum to be held on April 16, 2017, in a difficult context

''Growth rates are deteriorating, and public opinion is no longer enthusiastic as was before'', Levent Cakir, Journalist at Atilim explained to Abo. Also weighing on the Turkish economy are the long-term effects of the diplomatic crisis with Russia which, in the fall of 2015, following the shootdown of the Russian Sukhoi Su-24, involved in the bombings of northern Syria, has ruled the freezing of bilateral relations. ''The embargo on Turkish goods has had significant effects on the economy'', added Cakir. Despite the bilateral relations between the two countries having returned to normality after the meeting in St. Petersburg between the Turkish and Russian Presidents, on August 9, 2016, according to the Turkish press, the volume of trade between Turkey and Russia is expected to have decreased from a pre-crisis level of $38 billion to a current level of $17 billion. Precisely during the meeting in St. Petersburg, Russia’s Energy Minister Aleksandr Novak announced the resumption of procedures to build Turkish Stream. However, the resumption of the Russian project could have significant effects, especially on the Russian economy, which has committed to bypassing its strained relations with Ukraine. Following the severe terrorist attacks in recent months, Turkey has suffered a significant drop in foreign and domestic capital, while the Turkish lira continues to lose ground compared with other currencies. Ankara is also facing a serious crisis in the tourism industry which, according to the local press, is expected to have almost halved compared with pre-political crisis levels. Therefore, President Recep Tayyp Erdogan, after the failed coup of July 2015, ordered unprecedented nationalizations and economic policy reforms. In February 2017, major Turkish public companies saw their shares transferred to the Sovereign Wealth Fund (SWF). This was specifically the case for Turkish Airlines, Halkbank, oil company TPAO and Turkish Telekom. The five members of the board of directors of SWF were appointed directly by the Turkish President.

Europe and diplomatic crises

''Erdogan is using the diplomatic crises to motivate Turkish nationalists in favor of his Referendum'', added Levent Cakir. However, Europe, this time, could review its relations with Turkey after the vote. The highly-intensified election campaign for the constitutional referendum was also held this time among the communities of the Turkish diaspora in Europe. The cancellation of meetings with Turkish ministers and politicians, established by Holland, Austria, Demark and Germany, along with the anti-government demonstrations that took place in Bern, Switzerland, caused serious bilateral diplomatic crises with Ankara. Therefore, President Erdogan hurled accusations of ''Nazism'' against the authorities of these countries and ordered the closure of the Dutch embassy in Ankara. Turkey’s Foreign Minister Mevlut Cavusoglu was, instead, able to hold his assembly in Metz, France, in favor of reforms. However, the French authorities criticized Erdogan’s statements. The vote of Turks abroad may be decisive, if voters at home were to divide on the reforms proposed by the leader of the Justice and Development Party (AKP). However, the tensions do not stop there. Journalist arrests continue. A few weeks ago, the correspondent of Die Welt, Deniz Yucel, was arrested in Turkey. Chancellor Angela Merkel referred to the arrest as a ''disproportionate'' measure. Yucel is accused of terrorist propaganda and sedition. He had made email notes, published by Turkish hackers, sent by the Minister of Energy and son-in-law of the President, Berat Albayarak. Merkel had focused on the agreement with Ankara on migrant flows and visited the Turkish President earlier this year. The restoration of bilateral relations between Turkey and Russia has not yet had positive effects on the Turkish economy. The country is approaching the deciding constitutional referendum of April 16, 2017, in a context of severe domestic and international economic and political crisis. Diplomatic tensions with the European chancelleries, repeated terrorist attacks, and the temporary stop to negotiations for accession to the European Union have caused effects such as a decline in foreign investment, reduced tourist flows and high inflation rates. Therefore, the political uncertainty caused by the constitutional referendum could continue to divide the country and produce recessionary effects on economic policy.