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Analysis
Erdogan's 'gift from God'

Erdogan's 'gift from God'

After Turkey’s purge, stability is relative

by David Tonge in Istanbul

Wed 27 Jul 2016

The impact of the failed mid-July military coup in Turkey may be greater at home than abroad. The country is in new political territory. Of the external factors setting limits on Turkey’s policies, its ties with the US and the European Union may be weakened, relations with the International Monetary Fund are unlikely substantially to be changed, while those with Russia seem set to improve.

President Recep Tayyip Erdogan has long been pressing to amend the constitution to reinforce his powers. The coup attempt, which Erdogan has called ‘a gift from God’, has given him the chance of carrying out that aim.

Had the revolt succeeded, military-backed rulers would have been in conflict with a large tranche of the population. Months of unrest and repression, arrests and show trials would have followed. Hardly surprisingly, the armed forces split when confronted with the choice of whether to join the rebels.

In the medium term, the negative effects on the economy may be less than the positive repercussions of thawing relations between Erdogan and Russian President Vladimir Putin. At the end of June, Erdogan said he regretted the Turkish air force shooting down a Russian warplane in November 2015. The two presidents will meet on 9 August and may agree to alleviate Russian trade restrictions against Turkey, revive the Turk Stream gas pipeline, and revitalise a Russian nuclear project.

The prospect of a massive internal confrontation and possible civil war has been avoided. Yet, in the aftermath of the uprising, the authorities have shown little mercy against those deemed involved. Purges have rounded up 60,000 people – teachers, academics, journalists and judges, in addition to military suspects. On 25 July Amnesty International said it had received ‘credible evidence’ that the Turkish state was committing mass torture – including rape – in the ensuing crackdown. That day, the regime ordered the arrests of 42 journalists.

The coup attempt may affect business confidence and cause foreign investors, already hesitant about the quality of Turkish justice, to delay investment decisions. Shaken by the fall in the lira and the Istanbul stock exchange, Turkish savers have been switching from lira to foreign currency accounts. The upheavals are a further blow to the tourism industry, already buffeted by Putin's ban on Russian tourists travelling to Turkey.

Standard & Poor’s has downgraded Turkey to double-B, one rank deeper into the ‘non-investment grade, speculative’ rating. Moody’s has put the country’s investment-grade ranking on review for a potential downgrade. Such steps could cause forced selling from investment-grade funds, as well as higher volatility.

Turkey grew 4% in 2015 and entered the year strongly: GDP grew 4.8% in the first quarter compared with 2015. Industrial production was strong in April and May, electricity consumption was up 6% year-on-year in the second quarter, and the central bank’s survey of expectations was at the same high for the year in July as it had been in June.

All parties in the national assembly were quick to condemn the rebel officers. The coup led to around 300 deaths. The government has assumed state-of-emergency powers for 90 days. It has arrested one-third of the generals and admirals in the armed forces, and 6,000 military personnel of lower rank.

It has dismissed two of the 11 judges of the Supreme Court, detained 979 judges and prosecutors, jailed about 632 and suspended another 2,745 judges. It has closed 15 universities and published a 58-page list of banned schools and associations. There has been talk of reintroducing the death penalty, though this has faded.

Few people have much sympathy for Fethullah Gulen, the neo-Islamic leader self-exiled in Philadelphia, accused of helping foment the coup.

Gulen was allied with Erdogan in the 1990s and early 2000s but gradually their ways split. Gulen has established over 300 schools in Turkey and 1,000 worldwide, and for three decades has been infiltrating his followers into the judiciary, the police and the armed forces. In 2012, Erdogan began to act against Gulen’s schools in Turkey. In December 2013 prosecutors in Istanbul who were reportedly close to Gulen presented alleged evidence of corruption by Erdogan, his family members and some ministers.

The coup’s failure may herald relative economic stability, but at a different level and of a different societal quality from before. The new balance will stress relations with the West over human rights in general, especially with the US over Gulen’s role and Erdogan’s demands for his extradition. To Erdogan’s followers, the measures represent a justified response to an overt and malevolent attack. To his opponents, they resemble a witch hunt which threatens what little that is left of the checks and balances normal in a democratic society.

David Tonge is Founder and Managing Director of IBS Research & Consultancy, and a Member of the OMFIF Advisory Board.

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