PULSE of TURKEY No 2................... WEDNESDAY MAY 13th 1998
IMPACT OF "PEOPLE'S CAPITALISM" IN POLITICS
Early elections - stumbling block to economic stability.
The life span of the minority government.
The outcome of the announcement made by the CHP (People’s Republican Party) Chairman, Deniz Baykal, after his meeting with PM Mesut Yılmaz on April 23rd, was an eye opener for the observers of Turkey’s political life. It showed what a tremendous impact politics now has on the national economy and vice versa. It was about early general elections to be held on March 28th, 1999 and the replacement of the present government by an “election government” under an independent MP six months before the elections.
This controversial announcement, especially the part about the formation of “an election government in October”, immediately made an enormous impact, unprecedented in Turkey, on ISE (the Istanbul Stock Exchange) and the index fell sharply. On April 22nd the ISE index was 4365. Excluding the weekend on the 25th and 26th, it fell to 4020 in two workdays on the 24th and 27th. This 4.47% drop in the Stock Exchange meant the ISE’s market value receding from $68 bn to $62 bn and naturally involved an outcry in the media and among the people about “the cost of Baykal” to the economy and the market. This trend was particularly marked on Tuesday, April 28th, when Baykal’s statement at his party’s parliamentary caucus was broadcast by the media. In four minutes the market index fell by 3.2% down to 3891 and the market value of ISE down to $60 bn when Baykal said in a televised broadcast about the government, “farewell to them if they are not going to stick to the consensus we reached with the prime minister”.
Such was the panic in the market that the switchboard of the CHP’s headquarters was inundated with calls from throughout the country demanding “What the hell is Baykal doing?”. The Deputy Chairman of the CHP, Onur Kumbaracıbaşı, felt the necessity of announcing that the CHP would not withdraw its support from the government and the situation improved immediately. The uptrend that was triggered off by Kumbaracıbaşı’s announcement took the ISE index back up to the above 4000 limit in a matter of hours, putting an end to the economic crisis.
On the political front the strong opposition faction in the CHP, led by the former party chairman Aydın Güven Gürkan, delivered a broadside to Baykal at a press conference. President Demirel said that there was no such thing as “an election government under an independent parliamentarian” either in the Constitution or in practice in Turkey. DSP (Democratic Left Party) Chairman Bülent Ecevit accused Baykal of being a mastermind in causing political crises. DTP (Democrat Turkey Party) Chairman Hüsamettin Cindoruk was none the milder in his criticisms. PM Yılmaz dismissed the claim of an election government in October, but took a more reconciliatory stance and the crisis blew over both on the economic and political fronts.
Most important in this crisis was the influence Turkish politics had on the stock market. There are currently over 400 000 bidders in Turkey’s stock exchange and a single critical statement by politicians sharply increase or decrease their lifetime savings. With their families and friends, plus their economic and political influence it is an enormous force in the country. This is a remarkable occurrence, totally new in Turkish political life that has to be taken into account by political leaders in future.
Elections fail to surpass four-year limit. Is it Turkey’s eternal fate?
“We, economy bureaucrats, do not like early and frequent elections”, said the Treasury Chief, Yener Dinçmen, at his press conference at the beginning of April to explain the economic performance of the first quarter and the targets for the second quarter.
Indeed, during the 1963-1980 period the Turkish economy suffered greatly from frequent elections under the 1962 Constitution. One-third of the Upper House, the Senate, used to be re-elected every other year and when general elections and local elections every four years filled the gap, it meant elections every year.
Bearing in mind the tremendous harm to economic stability by this practice, the 1982 Constitution put an end to the bicameral system in Turkey by disbanding the Senate and stipulated general and local elections every five years.
This rule (elections every five years under Article 77 of the Constitution) has, however, never been practiced and early elections were held every four years each time. The first general elections under the 1982 Constitution were held on November 6th, 1983. They were followed by early general elections in November 1987, in October 1991 and in December 1995. It seems that the current Parliament will not be able to survive for more than four years either, given the fact that the next general elections will be held in March or April 1999, as agreed upon by Yılmaz and Baykal. Turkish politics are, however, a more complicated phenomenon and it may well turn out to surprise everyone by fulfilling its full time of five years this time.
A formula to save face, especially for Baykal, to address Turkey’s national needs is already in the offing. How? PM Yılmaz does not disagree with Baykal’s statement about elections in March or April 1999, provided that the CHP helps the Government to pass the reform bills in the next two months until the summer recess. But the claim of an election government under an independent MP in October, straight after the reopening of parliament, is causing controversy. Contacts are, therefore, now being made for the continuation of the present government throughout this year and replacing it with a four-party coalition, including the CHP, as from the beginning of 1999. The Prime Minister of this Government may be Mesut Yılmaz, Bülent Ecevit or İsmet Sezgin. The last-named is the most likely at the moment, as none of the four parties concerned oppose him. Sezgin is a very close friend and colleague of President Demirel and his premiership would greatly reinforce the DTP movement against Çiller’s DYP, if the judiciary does not put an end to her before that with so many corruption charges facing the Çiller family. If such a formula, which has already gained ground, materialises the general elections may well be held at the proper time in November 2000, after the nation’s desire is discovered at the local elections in March 1999. It would also help Turkey to carry out the current reforms in the economy, make the necessary adjustments in foreign policy and especially save it from the humiliating position of having the second highest inflation rate in the world after Sudan. Naturally it is all nothing but wishful thinking or speculation at this point, but Turkish politics are full of such “far-fetched surprises.”
Elections as a stumbling block to economic stability
To appreciate the reasons for the Treasury Chief’s dislike of early and frequent elections, it should be noted that the current efforts to curb the inflation, which rose to three digits at the beginning of this year, would be undermined. Official sources point out that the inflation rate was 16.8% in the six months that preceded the November 1987 elections and 48.5% in the following six months. These rates were 25.7% and 36% at the October 1991 elections and 23.8% and 46% respectively at the December 1995 elections. This so-called “election economy” is, therefore, one of the main reasons for high inflation rates in Turkey. It definitely undermines the efforts and sacrifices for economic stability as was distinctly seen in the December 1995 elections.
It is feared that, if early elections are not avoided, the same will happen this time too, as mere talk of it is making such an enormous negative impact on the stock market, on interest and foreign exchange rates to a smaller extent, and on economic fundamentals in general.
That is why a consensus has now been reached among the ruling parties that there should be no talk of early elections and that the year ahead be put to good use for the realisation of economic stability and reforms. It is now Parliament’s turn to make the most of the limited time left until the recess at the end of June for the legislation of the necessary bills. Baykal promised the Prime Minister that he would roll up his sleeves for it after the CHP’s national convention on May 23rd. Meanwhile, PM Yılmaz is trying to put an end to the inefficiency of the ruling parties’ parliamentarians.