Erdoğan slams former deputy PM Babacan over his resignation from AKP

ISTANBUL

Turkish President Recep Tayyip Erdoğan has slammed former deputy Prime Minister Ali Babacan over his resignation from the ruling Justice and Development Party (AKP), accusing him of “abandoning the common cause.”

“[Babacan] met with me upon his request. He said he will resign after the [June 23 rerun elections] because he lost his sense of belonging to [the AKP]. He reasoned this over the country’s economy. For us, the common cause should not be abandoned,” Erdoğan told reporters late July 9 on his return from a two-day South-East European Cooperation Process (SEECP) summit in Bosnia.

Erdoğan said he asked Babacan, who is a co-founder of the AKP, about new party rumors surrounding his resignation, but that he is “not thinking about it for now.”

“Mr. Ali is one of the youngest people to become a minister in Turkey. There were many subjects we could not agree on; the issue of interest rates is the most important among them. I always told him about the losses caused by interest rates,” he said, adding that when interest rates declined to 4.6 percent, inflation was at around 7 percent.

“There is no such thing that people will always remain here,” he said.

He said he had told Babacan that the cabinet could make use of his ideas or contributions if there were any.

The president also stressed that he had asked Babacan to become an adviser for the AKP. He, however, refused the offer, he said.

“Our party has a deep-rooted infrastructure. I told this to [Babacan] as well. I said, ‘It is your way but don’t forget that you do not have the right to break up the ummah [Muslim community]. You are doing this and you will not reach anything by doing this.’ I also told him not to delay [establishing a party] because there are four years until the next elections,” Erdoğan said.

Turkey ‘paid heavy prices due to dismissed Central Bank governor’s decisions’

Erdoğan also commented on the removal of Central Bank governor Murat Çetinkaya with a presidential decree, saying his decisions had burdensome costs, which were “beyond endurance,” and thus a change was needed.

“The step we took regarding the Central Bank is the result of the authority the new system gives to the president. Before the Central Bank was unquestionable, it was able to take steps at its will. In that form, [Çetinkaya] had many idiosyncratic decisions which had burdensome costs, beyond endurance. This became hard to put up with,” Erdoğan said.

The situation was assessed jointly with the Treasury and Finance Ministry, Erdoğan conveyed.

“We thought that ringing the changes would be beneficial. Thus, we appointed someone who was the deputy chief, not a stranger to the Central Bank,” he added.

Çetinkaya, whose four-year term was due to run until 2020, has been replaced by his deputy, Murat Uysal.

The most important economic instrument affecting financial stability and determination is monetary policy, according to the president.

“Every time the Monetary Policy Committee conveyed, we thought ‘what will happen this time?” Erdoğan stressed, adding that the number of committee meetings was reduced to 10 times in a year, rather than its previous monthly schedule.

“There are the decisions [Çetinkaya] made on his own,” he added.

Çetinkaya failed to consign trust to the markets, Erdoğan stressed. “His interactions with the markets were not great. These paved the way for other problems [in the markets].”

“The Central Bank is the key actor in the financial pillar of the economy,” Erdoğan said.

“If we do not revise it completely, if we don’t put it on solid foundations, we may face serious problems,” he added.

“Hence, we believe that taking this step for such a change would be beneficial for the country’s economy,” the president stressed.

Single-digit inflation

On a related note, speaking at the general assembly of the workers’ union Hak-İş in Ankara on July 10, the president said, “Had the Central Bank properly played its role in economic policy as expected, this removal would not have happened.”

Erdoğan also reiterated his view that high-interest rates cause inflation.

“You will see very soon what shape our interest rate policy will take,” he added.

“We have to bring down inflation to single-digits and we will succeed in this,” Erdoğan said.

The president added that the Central Bank from now on will support the government’s economic program more strongly and that the International Monetary Fund (IMF) door is closed for Turkey.

The new Central Bank governor, Murat Uysal, said on July 6 in his first remarks following his appointment that he will continue to “independently apply monetary policy tools to maintain price stability.”

Uysal also said that communication channels will be used in line with the bank’s targets.

The statement added that Uysal will hold a press conference in the coming days.

In 2018, the Central Bank held nine Monetary Policy Committee (MPC) meetings, as interest rates climbed from 8 percent to 24 percent over the course of the year.

At its latest MPC meeting on June 12, it held the policy rate - one-week repo auction rate - constant at 24 percent.

The bank’s next rate-setting meeting is scheduled for July 25.