Turkey’s newly appointed Prime Minister Binali Yildirim, a close ally of President Recep Tayyip Erdogan, announced a cabinet on May 24 that came as a relief to nervous investors by keeping key members of the economic management team.
While nearly half of the government was reshuffled in a sign Erdogan is tightening his grip, Deputy Prime Minister Mehmet Simsek, who is credited by investors for overseeing structural reforms and Turkey’s economic boom, kept his post along with Finance Minister Naci Agbal. The news sent the lira up 0.6% to trade at 2.98 per dollar. The lira’s gain was the strongest among emerging-market currencies tracked by Bloomberg. The benchmark Borsa Istanbul 100 index gained nearly 2.0%, the most in more than a month.
“Logic prevails – why would Erdogan not keep Simsek, so as to keep markets and investors on side for the time-being and with likely polls looming. Agbal also retained as finance minister, so also re-assuring”, Tim Ash at Nomura said in an emailed note. “Market positive – well keeps the faint hope of Turkish reform open for some time. This is not to say that Simsek will have that much leverage to deliver on his structural reform plan, the power is moving to Erdogan and his less orthodox policy advisers.”
In a sign Erdogan is not wasting any time in taking charge of the government affairs, the new cabinet will hold its meeting at the president’s palace on May 25. Everybody knows who the real boss is, who rules the Justice and Development Party (AKP), but Erdogan still wants to formalise this de facto situation. The division of labour is clear: Erdogan will make the decisions and Yildirim’s cabinet will implement them.
Erdogan hand-picked his long-time ally Yildirim to succeed Ahmet Davutoglu, who was allegedly ousted for allegedly blocking Erdogan’s path to greater power. Yildirim’s main task will be to push through constitutional reforms to give Erdogan more executive powers.
New names to the government include Nihat Zeybekci, who was appointed economy minister. Zeybekci, known as a figure close to Erdogan, was economy minister in Davutoglu’s government until the November elections, when he was replaced by Mustafa Elitas. During his term as minister Zeybekci had repeatedly called on the central bank to cut interest rates. His appointment suggests pressure on the central bank for further cuts will increase. Zeybekci’s return may also signal the politicisation of economic policy.
However, what investors had feared the most did not happen: Berat Albayrak, Erdogan’s son-in-law, kept his position as energy minister amid speculations that he could have replaced Simsek as the deputy PM in charge of the economy.
AKP’s spokesman Omer Celik has been appointed as the EU minister at a time when Turkey is at loggerheads with the EU over a key migrant deal. Foreign Minister Mevlut Cavusoglu remains in his post.
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