September 14, 2014

Political corruption disrupts economic balance

Mümtazer Türköne

The government's recent efforts to make Bank Asya, a private bank affiliated with the Hizmet movement, go bankrupt are alone enough to show how political corruption has thrown off the country's balance.

In the face of the graft and bribery investigations which became public on Dec. 17 and 25, 2013 and which implicated senior government officials, the ruling Justice and Development Party (AKP) adopted a defensive strategy of arguing that these probes were actually part of the Hizmet movement's coup against the government. In line with this strategy, it launched a comprehensive campaign of profiling and purging members of the Hizmet movement in a massive show of power that amounted to a witch hunt. As part of this campaign, it sought to undermine Bank Asya's prestige and drive it into a corner. Thus, the government and pro-government circles implemented a systematic plan to discredit the bank. However, this conspiracy was foiled as it was about to trigger a total breakdown of the economic system. Eventually, the Banking Regulation and Supervision Agency (BDDK) had to deny the false news stories and rumors about Bank Asya.

The pro-government Sabah daily and state-owned Anatolia news agency -- as well as Reuters and The Wall Street Journal, based on the Anatolia news agency -- had directly referred to a BDDK official in publishing a false story about Bank Asya. The BDDK was reluctant to deny these reports, but had to do it particularly in the wake of rumors that 10 banks had been placed under close monitoring by the BDDK triggered severe fluctuations in the markets. The BDDK is one of the independent political authorities created as part of EU harmonization efforts to ward off political pressures on the banking sector. The law that regulates its functioning complies with Western standards, but it opted to collaborate with the ruling party in its attacks on Bank Asya.

Everyone is sure that the attacks on Bank Asya come from the government and government-controlled organizations. Recep Tayyip Erdoğan openly made statements to discredit Bank Asya, though the bank's prestige is under legal protection. He argued that the bank's financial position is weak. State Minister Ali Babacan, on the contrary, made contradictory remarks. Yiğit Bulut, Erdoğan's economy adviser, disclosed deliberately distorted figures about Bank Asya although banking legislation explicitly prohibits this. All these facts reveal the conspiracy conducted behind closed doors.

Finally, the news stories referring to a BDDK official were the last straw of this Byzantine intrigue. You may find justifications for all the others, but it is clear in these false stories that the Anatolia news agency is used to add credence to the story. It is apparent that the ruling party tried to implement a sinister plot against a private bank. Numerous officials have played their part in this plot. However, this plot ended up in smoke due to the bitter truths of the economy. The BDDK remained silent for a long time before it was forced to deny the false stories because these rumors were about to trigger an overall crisis in the banking sector. The BDDK's denial coincided with the reports about the Q3 growth figures remaining considerably lower than expectations. Why did Bulut fail to make any comment about the recent development although he masterminds the conspiracy against Bank Asya?

Bank Asya is one of the dependable institutions in the banking sector. According to independent reports, there are 10 banks with riskier positions. These 10 banks suffered a big loss due to the above-mentioned rumors, forcing the BDDK to deny the rumors. The shares of these banks fell by 5 percent in one day. The top management of these banks was seized with panic. It became clear that it is impossible to force Bank Asya into bankruptcy without triggering the complete collapse of the country's economy. The financial sector has taken a deep breath for now. But only for now…

The ruling party's increased monopolization and move toward a dictatorial regime has been largely consolidated via the banking sector. Thus, any deterioration in this sector produces a blow to the ruling party.
The real risk group in the economy comprises the small oligarchic groups of capitalists who are close to Erdoğan and who are implicated in the graft probes.

Thus, the ruling party's system for distributing easy money to these capitalists via easily obtained bank loans for the construction sector is falling apart. The Bank Asya operation backfired and showed the weakness of this system.

Published on Today's Zaman, 13 September 2014, Saturday