Dervis Finally Throws Hat in Political Ring

Turkey

Economic News

22 Jul 2010
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Kemal Dervis, Turkey's most sought-after political figure, announced last week that he was joining the People's Republican Party (CHP) after long speculation as to where he might eventually land to launch his previously forsworn political career.



The August 21st decision comes after weeks of meetings between Dervis and various political and union leaders on the left, which the former economy minister, brought in last year from the World Bank to guide the country's economic recovery, wants to see united under a broad social-democratic banner. The November 3rd elections were welcomed after months of political uncertainty threatened to undo the country's economic recovery.



On announcing his decision to join Deniz Baykal's CHP, the country's oldest left-wing party, Dervis said it "is a rooted institution in Turkey and institutions are very important in economic, social and political life. The development of a country is closely linked to the power and strength of institutions in the country." But he added, "[these] institutions must obey the changing world and must renew themselves." He said the CHP had adopted a modern understanding of the relationship between the market economy and the role of the state and social development.



Baykal said the two men would continue to work towards unity on the left, which he is fond of calling the "national team." "I hope we can achieve [unity] in the coming days… This is a turning point. A new hope-inspiring choice has started to take shape."



International lenders will be pleased to see Dervis on board with the only party likely to put up a fight against the Justice and Development Party (AKP), and his role in any government is viewed as essential to secure loans for the country's recovery and its efforts to stick to an ambitious stabilisation package backed by $16bn from the International Monetary Fund (IMF).



Dervis's decision will hearten the country's secular-minded urban elite, who fear the rise to power of the popular conservative AKP, which polls place well above the 10% threshold needed to enter Parliament. According to various polls, the AKP, headed by the charismatic former Istanbul Mayor Tayyip Erdogan, would come out on top, with all of the current parties with representation unlikely to win enough support to enter Parliament. Detractors accuse AKP of Islamist leanings, though Erdogan says the party has shed the religious cloak of its predecessors; however, the country's influential military is going to keep a close eye on their performance in the elections.



The uncertainty over who will lead the economy comes at a time of economic uncertainty, as the country is burdened with huge public debt brought on by the economic crisis of a year ago. The Treasury announced on August 20th that domestic debt had risen in July to 130 376tr lira, or $79.9bn, from 126 830tr at the end of June.



According to Nasum Turker, the man who replaced Dervis at the post of economy minister, the fact that more than half of domestic debt is held by the public sector is good for sustainability, as the country pays down its massive debt burden. Turker said that $1.984bn in foreign debt servicing could be expected by the end of the year. By August 20th, the country had serviced $6.117bn in foreign debt.



He predicted on August 21st gross national product (GNP) growth of 3.9% in 2002, higher than the target figure envisioned in the country's pact with the IMF. Turkey's economy shrunk by some 9.4% in February 2001 after an economic crisis ripped through the country, shaving half of the value off of the lira.



Some semblance of calm will be essential if the country is not to have a repeat of past elections, when prudent fiscal strictures were dumped for an election economy. And Ankara will be watched closely that it keeps its huge stabilisation package on track as it heads for early polls. All of the mainstream parties have pledged to stick to tough economic reforms and to efforts to start talks with the European Union, which has yet to name Turkey a candidate for negotiations. It remains to be seen what Dervis's role will be and whether his sure hand will be at the helm of the country's economic recovery in any future government.

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