Erdogan's Growing Economic Woes
Some would call this a bubble:
Since late 2009, Turkey has lost $20 billion of foreign bank assets and taken on $50 billion of foreign bank debt
As we reported Aug. 3, Turkey's banks are still churning out consumer loans at a 30% annual rate, probably to capitalize the interest on loans bearing an 18% interest rate. The current account deficit is running at about $70 billion a year, which means that Turkey's banks will have to double their net external debt position to finance it. The Bank for International Settlements data (whence the chart was drawn) show no lending to Turkey from the rest of the OECD. We believe the money is coming from the Gulf states, whose largesse is not infinite.
Turkish exports declined last month as contracting European markets and adverse exchange rates mainly affected the performance of key automotive and textile sectors.
Turkey's exports declined 5.5 percent year-on-year in June to $10.85 billion, the Turkish Exporters Association (TİM) revealed yesterday, while exports posted a year-on-year increase of 3.6 percent in June.
"The biggest reason for exports decline in June was the shrinking demand in the automotive market. Automotive exports plunged by 22.3 percent. Also the ready-to-wear [retail] sector declined 12 percent as a result of shrinking demand. We are carefully following the declines in our flagship exports," Economy Minister Zafer Çağlayan said yesterday, according to Anatolia news agency.
Erdogan's authority stems first of all from his reputation as an economic wizard, a story which the world continues to buy. Why anyone would buy Turkish banks under the circumstances is a mystery to this former banker, but bubbles, as they say, last until they feel like fundamentals.
An imploding domestic credit bubble, constraints on foreign borrowing, soaring food prices and declining exports look like a toxic combination for Erdogan.
Comment on this item
by Soeren Kern
The problem of Islam in public schools has been allowed to snowball to vast proportions... not hundreds but thousands of British schools have come under the influence of Muslim radicals.
Bains was also instructed to stop teaching citizenship classes because they were deemed to be "un-Islamic," and to introduce Islamic studies into the curriculum, even though Saltley is a non-faith school.
Schools should not be allowed to become "silos of segregation." — Nick Clegg, Deputy Prime Minister
by Peter Martino
Europe's biggest failure vis-à-vis Turkey is another example of its unwillingness to face unwelcome truths: that whenever Islamists go into politics, they never turn out to be moderates.
EU leaders are now, belatedly, coming to realize that Erdogan is not their friend.
by Timon Dias
"Both materially, and in essence, sovereignty unconditionally and always belongs to Allah." — Recep Tayyip Erdogan, Prime Minister, Turkey.
What is surprising is that so many Western politicians, including EU-minded ones, apparently still ignore what the consequences could be of such an ideology. Do they really assume it could never happen to them?
by Gordon G. Chang
The second thing we get wrong about China is that it is safe to ignore periodic Chinese threats to incinerate our cities and wage war on us. They employ salami-slicing tactics, as with Scarborough Shoal... so that they do not invite retaliation.
If we cannot say these things clearly and publicly, the Chinese will think we are afraid of them. If they think we are afraid of them, they will act accordingly.
Chinese leaders do not distrust us because they have insufficient contact with us. They distrust us because they see themselves as protectors of an ideology threatened by free societies.
by Anna Mahjar-Barducci
If the government fails... to assert its power in the months to come it will become a de facto Somalia II.... Soon, these militias, if they have not already done so, will have their own government that will contest the decisions of the paper government of Tripoli… Indicators show that it is already fragmenting into three countries." — Professor Mohamed Chtatou, University of Mohammed V, Morocco.
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