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    What does the referendum results imply for the economy?

    Güven Sak, PhD14 September 2010 - Okunma Sayısı: 1099

     

    The referendum following the Ramadan Festival brought about a strong 'yes'. In my consideration, voters stated that they are satisfied with the conditions in general. The government restored trust with the referendum. How and why this result came out is another matter of question. Let us see today what the referendum results imply for the economy.

    First things first: the results reiterated that Honorable Prime Minister of Turkey has an extreme capacity to create coalitions that goes beyond the sense of belonging to a party. His other skills might be debated; but his political skills are indisputable. Proving this skill once again, the Prime Minister can unite the voters of other political parties around certain issues and alter the base of his party at will. See, he did it again. May this be what Turgut Özal used to call 'fluctuant center'? This is the first point which is not directly related with the economy.

    The ruling party will now try to transfer this 'referendum coalition' witnessed in the ballot box on last Sunday to the 2011 elections. As you might remember, the previous referendum on direct election of president, ended with 69% yes votes. That coalition was reflected as 47% of the votes for AK Party in 2007 elections. With a similar reasoning, it appears that it is possible to remain as the ruling party with a slightly different voter base. This time, however, the message delivered is interesting. Turkey seems to be going back to the two-party era in 1970's. This might be the meaning of this new construction at the center. And it would be wise to assess the referendum coalition with this perspective. 2011 elections with a MHP below the threshold appears at the target (at least at the target of Honorable Prime Minister). A parliament with two parties mainly implies the reinforcement of stability. For some reason, economic actors like this more. We will wait and see how policy uncertainty will evolve while political uncertainty decreases. This would be the second point.

    And now the third one: I personally think that, with this strong 'yes' in the referendum, the possibility that Turkey finishes the election marathon in three years strengthened. The marathon could have lasted four years, too. But with this 58% 'yes' votes it is more likely that presidential elections will be held in 2014 rather than 2012. In this sense, shortening of the election period alone should be seen as a positive development for the economy. This is the third point to keep in mind.

    So, why is the shortening of the election period good? Elections one after another will imply that budget means will be strained. This was always the case; and it will be the case. What is more, it would be clear that if important changes such as a new constitution based on 'Presidential System' as well as changes in the election system during the election period, the limits of the budget will be pushed even further. It would be for the sake of all of us if the damage period is kept shortest.

    But can these numerous changes be succeeded in such a short time period? Can elections be held alongside? I believe that the economy is weaker than it currently seems. Banks and firms wallow in liquidity since forward-looking expectations are weak. But this weakness also leaves space for pushing the limits as the US and the EU does. This is the case to some point.

    So there are to options ahead. We can either push the limits of the budget with targeted shots or make random shots, which will push up the waste.

    As the statement of the Honorable Prime Minister about fiscal rule indicates, not pushing the budget means is not an option for now. Then, limits would better be pushed with targeted shots. However, Turkey needs a strong economic vision for this.

    Setting a vision solves half of the problem.

    Let it be easy.

     

    This commentary was published in Referans daily on 14.09.2010

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