The numbers of the 48 hours after the mini-coup in Turkey, managed by a minority and badly organized part of the army, have seen over 1.400 injured, 290 dead, 6 people arrested, (including 3000 judges, magistrates or senior managers of the judicial system), 85 mosques in the country make a real call to arms at the time of weekly prayer through loudspeakers and by the muftis. These are facts that draw an event whose reaction obviously seems already well planned in terms of size and timing.
The Central Bank immediately approved extraordinary measures of unlimited liquidity to banks and support for currency shocks which will inevitably meet with a Turkish lira which already in the preliminaries is close to 3 against the US dollar, towards the highs of the year.
Erdogan's authoritarian regime has thus achieved a series of results extremely important:
- maintain power obtaining the inevitable support of the oppositions that otherwise would have been accused of anti-patriotism;
- a bath of "real politik" by the EU and the US, who, one for the immigrant issue and the other for the air bases, have had to make statements in support of the Government;
- further weaken the army avoiding further friction in the ambiguous relationship with the IS;
– pave the way for a consolidation of relations with the Muslim Brotherhood badly driven out of Egypt;
– reduce the threat of infiltration of the mystical clerical movement of Fethullah Gulen in the military and in politics with a cunning request for extradition to the US;
– prepare the population for one amendment of the Constitution on the path already traced of a radical Islamism and an absolute power in the hands of Erdogan.
A good war booty that does not change the conduct followed so far in the last two years, made up of repression of opposition bodies/media, control of the internet and digital networks and restrictive measures on all social and religious minorities present in the area. The effects of the events of these days and the bloody revenge of the Sultan make us fall back to Ottoman memories exactly like the parade liveries of Erdogan's palace guards and will certainly make investors and entrepreneurs reflect.
Strong power helps business, while the latent risk of a civil war puts the management of international business activities at serious risk. So a weakening of the currency as defended by the Central Bank, a further collapse of tourist flows, (despite an official apology to Russia for the downed jet in exchange for unblocking tourist visas), and a flight of foreign capital from the country is the minimum that can be expected at this stage. And as much as the rating houses will be able to turn their heads away as they have done for too long on the Middle East, it will be very difficult for the Erdogan government to contain inflation e deficit and launch a new reform plan when half of the population prefers to talk about the "weather" to avoid denunciations, interceptions and retaliation of various kinds.
In late May foreign exchange reserves they amounted to 116 billion US dollars with a decrease of 9% of the part relating to gold reserves, which fell to 18,1 billion dollars. A not too abundant buffer on closer inspection and which will be closely monitored by analysts even if lately some economic data have already been questioned as to their reliability. Given that the first half of the year already saw a 50% drop in net direct investment flows from abroad, I think this trend will inevitably worsen.
Turkey is a country divided in half between pro and against Erdogan, now amazed and bewildered that he is seeing the omnipresent images of the father of the country Ataturk replaced by those of Erdogan and the secular and guarantor role of the now non-existent army. And at the same time democratic institutions and the constitutional order are threatened in any case. A successful coup would have unleashed the adoring crowds of Anatolia linked to the religious and conservative side of the AKP and would have been more disastrous.
Between the effects of Brexit and this new tile now the European Union, orphan of a common foreign policy, is faced with the choice between suspend the economic effects of the agreement with Turkey on immigrants and face a new wave of pressure on its southern borders (especially the Greek and Italian ones) or finance a regime that is increasingly distant from those European founding principles and that never as now becomes an uncomfortable ally and an unmanageable neighbor.
The Governor of the Central Bank has denied the use of capital controls and/or new early and likely elections only a common strategy between the EU and the US will avoid the drift of a highly strategic buffer country for the West, a hypothesis with an urgent nature in the imminence of the US electoral round and which will change the tone of the debate from now on.
