Ex-Wall Street banker Simsek to lead Turkish economy in new cabinet
Turkish Prime Minister Ahmet Davutoglu named a respected former finance minister and banker to run the economy offering some reassurance to investors
Turkish Prime Minister Ahmet Davutoglu named a respected former finance minister and banker to run the economy on Tuesday, offering some reassurance to investors concerned the new cabinet was stacked with allies of President Tayyip Erdogan.
Some of the new appointments, including that of Erdogan’s son-in-law as energy minister, will exacerbate fears the ruling AK Party will opt for populist policies over structural reform and fiscal discipline.
Once a darling of emerging market investors, Turkey has seen its star fall dramatically in recent years, hit by slowing growth and concern about Erdogan’s outsize influence over monetary and fiscal policy.
The appointment of former Finance Minister Mehmet Simsek to deputy prime minister should give investors some confidence. Simsek - who rose from poverty in rural Turkey to work at UBS on Wall Street and Merrill Lynch in London - will be responsible for the economy, a senior official told Reuters.
Simsek told reporters on Tuesday he would push ahead with the reform agenda of his predecessor Ali Babacan, whose absence from the cabinet is likely to be seen as a negative. The two have long been seen as a counterweight to Erdogan, who has railed against high interest rates, stoking fears about the central bank’s capacity for independent action.
“Babacan’s absence is the most significant issue regarding the new cabinet,” Deniz Cicek, an economist at Finansbank said in a note. “It is not clear if Simsek alone will be able to fend off possible harsh criticisms of the central bank and give comfort to markets when concerns about central bank independence and monetary policy rise.”
The lira, one of the worst performing emerging market currencies this year, weakened more than 1 percent against the dollar, while the BIST 100 stock index fell more than 4 percent. Sentiment was also bruised after Turkey shot down a Russian warplane near the Syrian border.
In a snap election this month the AK Party founded by Erdogan regained the single-party rule it had lost in a June 7 ballot, taking nearly 50 percent of the vote.
Davutoglu told a news conference the government would focus on structural reforms and the re-writing of a constitution still left over from a military coup in 1980.
Investors worry that Erdogan’s vision of a “new Turkey” with increased economic and international clout, will see further crackdowns on his opponents, growing authoritarianism and emphasis on consumption-led growth.
“Looking at the composition of the new cabinet, we are even more doubtful than before about the government’s commitment to structural reform,” said Wolfango Piccoli of Teneo Intelligence in a note.