The Turkish lira is accelerating its downward trajectory, despite the appointment of the new finance minister, Mehmet Simsek, who is considered a representative of a rational fiscal policy in Turkey. On Wednesday morning alone, it lost another 3.5 percent against the dollar. For one dollar, 23.06 lira must now be paid, on the day of Erdogan's election, on May 28, it was only 19.93 lira per dollar. The currency also continued to deteriorate against the euro. For one euro, 24.63 lira were demanded on the foreign exchange markets.
Andreas Mihm
Business correspondent for Austria, East-Central, Southeastern Europe and Turkey, based in Vienna.
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"A finance minister does not make a monetary policy summer," commented Ulrich Leuchtmann of Commerzbank. The appointment to a politician who does not advocate Erdogan's unorthodox policy of low interest rates to combat inflation is a "perhaps necessary, but by no means sufficient, condition for an actual permanent U-turn in monetary policy." This was already evident in the financial crisis of 2018.
Analysts see the downward spiral that has been accelerating since Erdogan's election victory also confirms the assessment that the central bank had supported the lira until then, as far as the ailing reserves would have allowed. Accordingly, there is a "pent-up demand" when it comes to adapting to the real economic situation in Turkey. The American investment bank Goldman Sachs had predicted a further weakening of the lira after Simsek's appointment. Within a year, a rate of 28 lira per dollar could be reached.
Meanwhile, speculation continues to halt the replacement of the head of Turkey's central bank. Sahap Kavcioglu, whom President Recep Tayyip Erdogan appointed as the fourth governor in two years in 2021 and who, at his behest, lowered interest rates from 19 to 8.5 percent despite galloping inflation, is to be replaced.
One of the candidates for the post is the Turkish-American financial manager Hafize Gaye Erkan. According to Turkish media reports, she has met not only with Simsek, but also with President Erdogan. Erkan would be the first woman to hold the post.
Born in 1982 as the daughter of a mechanical engineer and a mathematician, she trained as an industrial engineer in Turkey. In the USA, according to her LinkedIn entry, she completed a doctoral program at Princeton in no time at all and completed programs at Harvard Business School and Stanford University. Her CV shows the position of Managing Director at Goldman Sachs. For more than 7 years, she was co-CEO of First Republic Bank in San Francisco before resigning unexpectedly more than a year ago.
After all, that was early enough not to be directly and personally linked to the bankruptcy of the largest credit institution in America that went bankrupt since 2008. The bank, which had been taken under control by regulators, was sold to JPMorgan. Erkan had moved on to the board of directors of insurance broker Marsh McLennan. In 2002, she was also appointed CEO of real estate finance and investment firm Greystone.
Obviously, it does not have any special experience in monetary policy. She is respected in New York's financial industry and "is considered tough, smart and effective," as quoted by Reuters as saying Kathryn Wylde, chairwoman of Partnership for New York City, a nonprofit organization where Erkan once served on the board. "She's certainly not someone you can push around, but she can also disagree without being uncomfortable," Wylde said.