Purge in bureaucracy may unsettle markets, economist warns

Erdal Sağlam, an economist and a columnist from the Hürriyet daily, wrote in his latest article about rumors that the government is poised to kick off a purge in the economy bureaucracy under the guise of eliminating people affiliated with the Hizmet movement; those rumors alone, regardless of any action that may follow, would be enough to damage the markets, he said.

Sağlam argued that the government's ongoing bureaucratic purges have taken the form of a witch-hunt since a corruption scandal erupted on Dec. 17. There were massive dismissals and reassignments in the judiciary starting with the prosecutors who initiated the graft probes; this wave of eliminations has spilled over to other areas, said Sağlam. He said the government is rumored to be planning to expand the purges to include critical institutions administrating different spheres of the economy, like the Central Bank of Turkey, the Banking Regulation and Supervision Agency (BDDK) and the Capital Markets Board (SPK).

In the meantime, bureaucrats who have no connection with the Hizmet movement but who may have been reluctant to abide by politicians' orders have also been included on the list of names to be left out in the cold, Sağlam noted. He said this situation has created a new battleground for the internal controversies of the ruling Justice and Development Party (AK Party). Besides, a number of religious orders and communities have been vying to increase their influence in the ranks of the bureaucracy, he maintained.

Sağlam brought forth some rumors floating in Ankara that Central Bank Governor Erdem Başçı was forced to step down before the bank's general assembly meeting slated to be held this week. Başçı has been under heavy pressure from the government, especially Erdoğan, to keep the interest rates low. Erdoğan has occasionally lashed out at Başçı in his public speeches over the bank's monetary policy decisions.

Sağlam said bankers do not estimate that such pressure to resign is likely, yet they admit that they are also aware of words circulating around about a plan to make a change in the top brass of the Central Bank. “Everyone knows that the governor's term in office is continuing so no one can depose him, but he [Başçı] may be compelled to resign and a replacement may be appointed in his stead by adding an article [in the Central Bank's bylaws] at the general assembly meeting,” said Sağlam.

He also noted that Erdoğan might not be so assertive in getting rid of Başçı to avoid disturbing the markets, but that he may still dismiss two deputy governors of the bank.

Published on Today's Zaman, 14 April 2014, Monday