Not just buildings, but people’s trust in a wobbly postwar system had collapsed. The reason for so much loss of life was not just faulty construction but a culture of complicity between those passing the laws and those breaking them. Ordinary people, already impatient with a self-seeking political class, discovered that even the bureaucracy and military were late in helping them emerge from the rubble in their hour of need.In 2001 it was the whole economy that collapsed, the sadly predictable fate of successive governments that funded their way out of trouble on the backs of high inflation. Successive governments had sawed away fitfully at reform, never believing the branch on which they were sitting would finally give way. Soaring interest rates and the plunging value of the lira sealed the fate of a whole generation of politicians. The postwar political machine had simply run out of fuel.
These crises, of necessity, ended Turkey’s sense of isolation. The maxim that “Turks have no friends but themselves” proved all too hollow in the aftermath of the quake when nation after nation, including Greece and Armenia, offered their help. However, there were two institutions in particular that restored stability. They were referred to as Turkey’s twin anchors, but they are institutions that inspire no great affection in the Turkish public now. This first was the International Monetary Fund (IMF), which essentially took over the financing of Turkish debt from a collapsed financial sector. It committed Turkey to a program of reform, restored credibility and reduced the cost of borrowing. The second was the European Union. At the 1999 Helsinki summit Turkey was declared a candidate country and embarked on a predictable process of political reform. That process continued unabated, at least until 2005 when Turkey acquired a seat at the negotiating table.
Today, Turkey is a more confident nation. It has been badly affected by the global economic downturn, of course. The priority is not just to restore growth but to tackle unemployment and fight what is now being described as the “jobless recovery.” However, Turkish institutions have held firm. The Turkish Treasury, after teasing the markets with the prospect of a further IMF program, has made it clear that this will not happen. Instead, an IMF mission will visit Turkey in May to conduct an “Article IV” routine surveillance. The markets have not panicked at this announcement. Turkey has been successful in issuing a 10-year eurobond offer. Looked at from abroad, things seem relatively rosy. While some may twitch at a growing current account deficit, debt as a percentage of gross domestic product (GDP) is well within the Maastricht criteria. To paraphrase an editorial in The Wall Street Journal last week (“Turkey Well-Placed to Face Challenges”): Turkey has its problems but it sure as hell ain’t Greece.
Bülent Eczacibaşı, one of the country’s leading industrialists, has flattered this new sense of self-reliance by praising the decision to face the future without holding the IMF’s hand. An IMF deal might have trimmed interest rates further, but in the long run it will be to Turkey’s advantage to be seen to be standing on its own two feet. It is certainly not in his or the nation’s interest to panic.
However, the true test of Turkey’s new declaration of independence will come in the months ahead as the government negotiates the twists and turns of what promises to be a difficult period, littered with constitutional referenda, elections (probably this time next year) and possibly a few pitched battles with its own armed forces. The markets are aware that one of the reasons Turkey has been reluctant to sign up to an IMF a program is that the government wants to preserve room to spend its way out of any future difficulties. Heaven forbid there will be a real earthquake, but there may be a few jolts.
