Economist Müftüoğlu: Erdoğan’s plan is a political move

The President of the AKP, Recep Tayyip Erdogan, talked about the “FX-protected TL time deposit” model on Monday evening. After Erdogan’s speech, the Ministry of Treasury and Finance announced the details of the model. Accordingly, the depreciation of the TL denominated money deposited in 3, 6, 9 and 12-month deposit accounts against foreign currency will be covered by public finances.

According to many economists, this model is extremely risky. Because even though it lowers the exchange rate to a certain extent, this system means that the public finances are under a great burden. This means that the burden placed on public finances is also billed to society.

After Erdoğan’s statements, with the sudden appreciation of the TL, it became clear how the burden to be incurred by the public will be met with the taxes published in the Official Gazette: Special Communications tax (SCT), Environmental Cleaning tax, stamp tax, fees, penalties under the VUK were increased by 36.2 percent and the property tax was increased by 18.1 percent, all measure that will come into effect from 1 January 2022.

More a political move than an economic plan

Speaking to ANF, economist Özgür Müftüoğlu believes that Erdoğan’s statements are more of a political move than an economic one. According to Müftüoğlu, the AKP has tried to implement all the models proposed in a long time, not based on economic or social results, but on political outcomes.

The reason for this, is the AKP’s efforts to survive. “It is very difficult to interpret the move made economically, because what has been done is far from economic logic. From the moment it came to power, the AKP built its system on taking from the poor and giving to the rich with its neo-liberal policies. But while it used to do this more implicitly, today it does it much more openly. It goes the way of direct resource transfer. The reason for this is, of course, because the economy has become even more unmanageable and unsustainable, even in a state of chaos in the last period.

The AKP is doing two things here. On the one hand, it carries out a practice that will please the capital. On the other hand, this is actually a move against it, as it was revealed that it could not run the economy due to this exchange rate increase – something the opposition did not emphasize much. To attract and manipulate the voters, who gradually distanced themselves, it is now saying, ‘Look, we can actually lower the rate if we want.’ That was largely the goal.”

The opposition needs to propose a solution model

Müftüoğlu emphasizes that this is a political move.

The AKP, who says that there is no possibility of early elections, is this a strategy that can be an election investment and how sustainable is it? ANF asked the economist, who answered: “Of course, it can be called an election investment on one side. After all, the main goal is not to give up power. There is also a situation like this: we are experiencing an incredible economic crisis and collapse, inflation is very high in current terms, but the opposition has been holding on to the fact that it will produce a solution, saying ‘ballot box or ballot box’. What will you tell people when you go to the polls? It is not enough to say ‘what the AKP has done is bad’. This gives Erdoğan a trump card; when the economy is talked about only because the exchange rate has risen and there is opposition here, the hand of the opposition collapses as soon as he says, ‘Here, I dropped the exchange rate for you’. To the question of how sustainable it is, I can say that if it were a normal state, it would look at the economic and social consequences of the policies it implemented, and it would progress that way. The AKP has no such claim. It doesn’t care about what happens next. On the understanding that we will find a solution for it then.

Sustainable, because Turkey is a country rich in underground and surface resources. An autocratic system was established here. When people need hot money, they sell their land, streams and all their public assets to Qatar or here and there. They do that. They can go on like that. As long as there is no democracy, the AKP will continue this. Because this has to do with democracy. It continues for 20 more years as society has its hands tied. The opposition should act on the basis of democracy and law. It needs to generate alternatives. This is what society wants. You just said the exchange rate and the rate fell. Look, the people are out, dancing halay because the exchange rate has fallen. You need to set up policies that will solve the basic needs of society so that you can convince society. Otherwise, we will go to that ballot box and unexpected results will come out. There is no democratic environment, so elections should be established under democratic conditions.”

Poverty will increase

Another point underlined by economist Özgür Müftüoğlu is that this model, which Erdoğan presents as a miracle, is purely for the wealthy. For this, the money of the society will flow to the banks as debt. “It is said that there are over 300 thousand deposits, close to 1 million. Surely more will be added to this. There is no such thing as lowering the currency anyway. No one says the government is reducing the currency. Rather, let’s go and spoil what we have. We saw this the very next day. That night, the dollar dropped to 11, and the next day it rose to 13 or even 14. There is also this: the rise or fall of the exchange rate is not only a matter of trust, but also related to the productivity of the economy. As a country, we do not produce anything, including value. So this means that the exchange rate will rise. This means that they will take the interest paid by the bank, that is, the part that the public says ‘I will pay’, out of our pocket, that is, from the pocket of society. This will accelerate poverty. But society’s money will be enough to a certain extent. Then, looking at options, it will borrow money, print money, and inflation will rise. I hope I’m wrong, but I already believe that inflation will reach triple digits. As a result, the banks will be indebted. This will be charged to the public finances and from there the people will be made poorer by taxes.”

Müftüoğlu continued: “It should also be emphasized that retirees earn some money by depositing their bonuses for 1 month and there is nothing about them in this arrangement. It starts at a three-month limit. This means that those who have a certain time and amount of money can deposit money in this system in the medium and long term. If there was an open interest rate increase, it would have included those with less money, as I gave in the example, but this has nothing to do with them. It is a plan built entirely to actually enrich the wealthier segments.”