Recep Tayyip Erdogan
Birth of a Dictator

In the wake of last month’s failed coup in Turkey, President Recep Tayyip Erdogan has alarmed Western leaders with his sweeping efforts to stifle dissent. Yet Europe’s dependence on Turkey has forced Germany and its allies to temper their reaction to the crackdown in Ankara.

12.08.2016 | von John Blau

President Recep Tayyip Erdogan appears more popular than ever following the military coup earlier this year.

In 1998, several years before Recep Tayyip Erdogan became Turkey’s prime minister, he offered what may well have been the best indication of how he would lead the country.


“Democracy is like a train,” he said. “When you reach your destination, you get off.”

Eighteen years later, under President Erdogan, those words resonate even more clearly. Less than a month after the failed coup against him, the Turkish leader has gone to great lengths to silence his critics.

The steps he has taken - by his own admission, a “purge” and “cleansing” of the Turkish state - have shaken Western leaders’ faith in Mr. Erdogan, and raised questions about the future of democracy and the rule of law in his country.

Since the coup attempt on July 15, Turkey has suspended more than 60,000 civil servants, including 3,000 judges and thousands of soldiers, teachers and police officers. Some 13,000 were taken into custody. Mr. Erdogan ordered the closure of 1,000 schools, and 21,000 teachers at private schools lost their jobs.

Recep Tayyip Erdogan, President of Turkey

After declaring a state of emergency, the Turkish president used his sweeping powers to shutter 16 TV broadcasters, 23 radio stations, 45 daily newspapers, 15 magazines, three news agencies and 29 publishers. He ordered the arrest of more than 100 journalists and voided press credentials for more than 300 reporters.


Critics warn that Mr. Erdogan won’t stop until he has dismantled each and every check on his power - from opposition parties to the news media and justice system. The response from Western leaders, however, has been measured, a testament to Turkey’s pivotal role in helping Europe achieve its policy aims.

Geographically, Turkey serves as a buffer between the war-torn Middle East and Europe. The country’s military is the second largest of any NATO country, behind the United States. It is also an important symbol for the West, as a majority Muslim state that has embraced modernizing forces - proof that Islam and democracy can live side by side.

The success of Europe’s refugee policy also hinges on Mr. Erdogan. Without his cooperation, the controversial deal hammered out by German Chancellor Angela Merkel would collapse, along with her political future. Yet critics argue that Turkey’s strategic importance should not outweigh concerns over recent developments within the country, which some worry is now on the fast track toward dictatorship.

Since taking office in 2003, Mr. Erdogan has gradually tightened his grip on power. His AKP, the Justice and Development Party, enjoys an absolute majority in parliament, but the Turkish president prefers to govern by decree, without interference from the legislature.

Ultimately, the July coup meant to depose Mr. Erdogan has only made him more powerful. Less than a week later, he announced he would suspend the European Convention on Human Rights in Turkey.

The coup attempt has also galvanized his supporters, who took to the streets of Istanbul en masse on Sunday in a patriotic show of solidarity. Organizers of the rally - considered the biggest in Turkey’s history - said some 5 million people participated, while independent observers put the tally at 3 million.

German Chancellor Angela Merkel and the Turkish president shake hands but disagree on numerous issues.  © Reuters


President Erdogan used the demonstration as an opportunity to bring his political rivals in line as well. The leader of the CHP opposition party, Kemal Kilicdaroglu, has even spoken of an “atmosphere of reconciliation” taking hold in Turkey.

Mr. Erdogan, meanwhile, has spoken of tracking down and stamping out the opposition, specifically adherents to cleric Fethullah Gülen, whom the Turkish president has blamed for fomenting the coup. Mr. Gülen lives in exile in the U.S. state of Pennsylvania, and the government in Ankara is seeking his extradition to face charges in Turkey.

In an interview, the Turkish leader pledged to ensure that “every step is taken within the law.” But he has also raised the possibility of reintroducing the death penalty in the wake of the coup, pending parliamentary approval. That suggestion has put him further at odds with European Union member states.

At the same time, he has pointed the finger at Western leaders. When Germany blocked a live broadcast of the Istanbul rally to Mr. Erdogan’s supporters in Cologne, the Turkish leader criticized Berlin, asking “Where is the democracy?”

Germany, meanwhile, is the biggest foreign investor in Turkey, at a time when the state of the country’s economy is worsening. Since the attempted coup, the Turkish lira has lost 7 percent of its value against the U.S. dollar. Stock markets plummeted, and in the weeks that followed, ratings agencies have taken a hard look at Ankara.

Standard & Poor’s had already ranked Turkey as “high-risk” before the coup attempt, but in the days afterward it downgraded the country’s rating further due to the political situation in the country. It also set Turkey’s outlook at negative, suggesting that another rate cut could be on the horizon.

“We expect a period of heightened unpredictability that could constrain capital inflows into Turkey's externally leveraged economy," S&P said in a statement.

Mr. Erdogan denounced the ratings agency’s move, but it’s clear that his country is facing serious financial difficulties. With a current account balance at negative 4.4 percent of gross domestic product, Turkey is heavily dependent on foreign cash inflows.

The majority of its foreign debt is financed by short-term loans, meaning that each year, the country has to refinance debts equivalent to about a quarter of its GDP. This dependence makes Turkey especially vulnerable to the whims of investors abroad, and two-thirds of direct foreign investment in the country comes from European Union countries.

The failed military coup has helped the Turkish president strengthen his position.


In light of those capital needs, Mr. Erdogan can’t afford to damage investors’ trust in his country. Turkey also relies on European visitors to buoy its tourism industry, which is already in crisis. And without a strong export economy, domestic demand is the main driver of prosperity in the country.

While the International Monetary Fund projected in April that Turkey’s economy would expand by 3.8 percent for the year, the political turmoil gripping the country stands to weigh on growth. The IMF said that if foreign investors stop refinancing the country’s debts, Turkey’s economic situation could quickly deteriorate.

Preventing that, the IMF argued, will depend in part on keeping relations between Turkey and the European Union from going downhill. It will also hinge on how ratings agencies react. The next big test for Turkey comes on August 19, when Fitch reviews its rankings for the country.

Observers worry that Mr. Erdogan’s crackdown on dissent threatens to derail years of economic progress in Turkey. In the decade after he became prime minister, the country experienced growth that brought about political stability. Per capita income tripled, and at one point Turkey’s economic expansion surpassed China’s.

U.S. investment bankers hailed the Turkish cities and entrepreneurs that drove this growth as “Anatolian tigers.” But the climate for the country’s business leaders has worsened considerably, as Mr. Erdogan’s “cleansing” measures creep into the corporate sphere.

The Turkish president has vowed to strangle firms with ties to his rival, Fethullah Gülen, describing the business world as “where they are the strongest.” Dozens of business people have already been detained for alleged ties to the Gülen movement, including the heads of the Boydak and Naksan conglomerates, as well as the tourism firm Ugur.

Mr. Erdogan forced Bank Aysa, a lender with links to Mr. Gülen, to cease operations. Turkey’s Capital Markets Board also canceled the professional license of Mert Ülker, the head of research at Ak Investment, for what it deemed a critical report.

Some 4,000 businesses and associations are under investigation by the finance, interior and justice ministries for potential financial ties to the Gülen movement, according to Turkey’s pro-government Sabah newspaper. If the state substantiates links to the U.S. cleric, the businesses could be expropriated and their owners charged with aiding terrorism.

Few voices within Turkey are willing to speak out about the radical changes shaking the country. When contacted, well-known professors, as well as businessmen with media ties in Germany, declined to speak about the latest developments, citing the risks.

The risks to Turkey’s economy also come at a critical time. As conflicts rage in neighboring countries and unrest continues to roil northern Africa, Turkey is seeing shrinking demand for its exports. A wave of terror attacks and tensions with Russia have also taken a toll on tourism revenues, which account for 6 percent of annual economic output and 3 million jobs.

The sector is also an important source of foreign cash. Turkey’s current account balance is in negative territory, and if investors leave, that deficit will only grow. The gap reflects structural problems that have plagued Turkey’s economy for years, including its trade imbalance. Political tensions - underscored by the mass protests against Mr. Erdogan three years ago - have made many investors think twice about putting their money in the country, and the outflow of venture capital has dampened Turkey’s economic growth ever since.

Since the coup attempt, German investors are also more jittery. “The events heightened companies’ uncertainty,” said Eric Schweitzer, the president of the Association of German Chambers of Commerce and Industry, DIHK. With investors already fleeing Turkey, Mr. Schweitzer said developments in the country stand to threaten future business deals as well.

Despite Turkey’s dependence on foreign capital, Mr. Erdogan has been undeterred from taking actions that have worried Western countries. His meeting with Russian President Vladimir Putin in St. Petersburg this week served as a reminder to European leaders that Turkey’s ties extend beyond the European Union.

Mr. Erdogan knows that the United States and Europe need Turkey by their side in the fight against the Islamic State. Meanwhile, more than 3 million people fleeing conflict in the region are now sheltering in Turkey, and Chancellor Angela Merkel and her counterparts are relying on Ankara to help stem the flow of refugees to Europe.

Christian Lindner, Head of Germany's Federal Democratic Party

As a result, many Western governments’ reactions to Mr. Erdogan’s crackdown have been uncharacteristically mild. In Berlin, Ms. Merkel said that she expected the Turkish leader to adhere to “proportionality” in his response. Austria was the only E.U. member state to suggest that accession talks with Turkey be cancelled.

Tougher talk has come from opposition politicians, including the head of Germany’s Federal Democratic Party, Christian Lindner. “We are witnessing a coup from above, as in 1933 after the burning of the Reichstag,” he said. “Erdogan is establishing an authoritarian regime tailored to one person alone.”

The German chancellor’s office, meanwhile, has dismissed the notion that Ms. Merkel has made herself dependent on Turkey’s president: “Turkey needs Europe at least as much as the other way around.” The billions of euros that Europe is paying out to Ankara under the refugee deal is just one such example.

For the United States and Europe, the challenge is to make clear to Turkey that Mr. Erdogan has gone too far, without alienating the country and stoking anti-Western sentiment. For the Turkish president, the choice is whether to push ahead with the crackdown in a bid to consolidate his grip on power - or to embrace a more moderate path forward in hopes of healing the country’s divisions.

Alexander Graf Lambsdorff, vice president of the European Parliament, described the “big question” the Turkish leader is facing: “Whether Erdogan is ready to jeopardize Turkey’s vital interests, because of personal reasons or power politics.”


Handelsblatt editors Mathias Brüggmann, Jan Hildebrand, Gerd Höhler, Til Hoppe and Jens Münchrath collaborated on this story. To contact the editors: brueggman@handelsblatt.com, hildebrand@handelsblatt.com, hoehler@handelsblatt.com, hoppe@handelsblatt.com and munchrath@handelsblatt.com


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