At the end of a long day, as the Turkish lira plunged to a new all-time low against the euro and the US dollar, the Turkish president announced a series of measures to support the pound and guaranteed that the government would cover losses by depositing the pound. holders in cases where the depreciation of the lira against foreign currencies exceeds the interest rates of the banks.

On Tuesday, the pound managed to rebound against foreign currencies and regain its losses from last month. Erdogan’s supporters began celebrating the return of reading her on Twitter with the hashtag #HeWasRightAgain.

The president seems to have saved the day, but can he really save the country and its future in politics thanks to his new bond system? I very much doubt it.

Ordinary households will miss

First, in this model, there is no justice. It is the Treasury which will compensate for any losses of depositors in lira. This means that households that have no savings in the banks will have to share the burden of further depreciation of the lira.

And what about those people who sold their dollars early enough, to buy dollars at a much lower rate the next day and made huge gains – there is speculation that some investors close to the government have? received clues before Erdogan’s announcement.

Second, it is not a sustainable model. In the event of further depreciation, the new regime could raise public debt to record levels and push inflation further.

According to the Turkish National Institute of Statistics, inflation was just above 21% last month. Independent researchers estimate it at 60%.

The “Turkish dollar program”

Third, this move prioritizes the US dollar over the lira. Before the new deposit system was announced, 64% of bank deposits were denominated in foreign currencies. We do not know how many of these deposits were transferred in lire. It doesn’t matter that your lire are essentially treated as if they were US dollars. Some observers have already dubbed it the “Turkish dollar system” on social media.

Critics also argue that Erdogan’s move is essentially a “hidden” interest rate hike, a move he refused to accept – arguing that Islam demands lower rates – despite warnings that sticking to interest rate cuts to control inflation would backfire.

No one, apart from his loyal voters, trusts him more. Investors may be cautiously optimistic about the financial impact, but they are well aware that it is stubborn, illogical, and also unpredictable.

Erdogan again president?

We know that Erdogan sees himself as the master in all areas. Today, he is an economist who wants to control the economy and who will stop at nothing to achieve his short-term political goals.

He is obsessed with securing a third presidential term in the 2023 elections which coincide with the 100th anniversary of the Turkish Republic. His campaign will focus on conveying the message to voters that he has saved the country from foreign interference that would financially ruin Turkey.

It will highlight the increase in exports, positive GDP growth and the success of its megaprojects. However, the people who have become impoverished in recent years because of his economic incompetence will never forgive him.

Taking a rabbit out of the hat may have saved the day, but whether it will be enough to secure another presidential term, that’s another matter.

Banu Güven is a Turkish journalist and television presenter. She writes for various German and Turkish media. She has been living and working in Germany since 2018.

Edited by: Rob Mudge