Tag: Turkey

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News

Finland and Sweden: Applications to join NATO

Introduction

The ongoing war in Ukraine has caused numerous security concerns to arise in many European countries. As the Russian Federation continues its military actions, two countries that have historically held back from joining NATO, Finland and Sweden, have applied to join the intergovernmental organization. This led to a rise in tension in their relationship with Russia, but many Western countries have expressed their support.

Why was the decision made?

The two countries’ decision stemmed from Russia’s ongoing invasion of Ukraine, which started earlier this year on February 24th. The West has criticized Vladimir Putin for endangering European security since, and the Nordic countries debated heavily on whether or not to join NATO. Although both countries have been NATO partners for many years now, they did not have the one thing that could protect them from a potential attack: article five. Article five is part of the collective defense, which is at the heart of the organization. It states that an attack on one of NATO’s members means an attack on every member, hence guaranteeing help from other members of the alliance in the case of military trouble. 

Therefore, Finland and Sweden’s decision to join NATO is significant as both countries have a long history of staying away from military alliances and maintaining a mostly neutral approach to many political situations. As NATO partners, Finland and Sweden do not currently have the protection of article five, and aren’t fully involved in the military decisions that are made. The situation in Ukraine, however, forced them to change their long-standing policies of neutrality and apply to become full members of NATO, an indicator of just how serious the security issue is for all European countries.

International impacts

In order to join NATO, the decision must be unanimous — supported by all 30 member states. Although most members have supported Finland and Sweden, Turkey has been hesitant in accepting them into the alliance. According to Turkish president Recep Tayyip Erdogan, Sweden and Finland’s governments back groups considered ‘terrorists’ by the Turkish government. Despite this setback, the member states have agreed to speed-up this process, considering the threat that Russia poses to both Finland and Sweden (the process normally takes up to 12 months). The Russian government has also commented on this situation and even though it does not consider the countries’ applications to join NATO a threat, Russian Deputy Foreign Minister Sergey Ryabkov said the two countries “should have no illusions that we will simply put up with it.”

Conclusion

Despite Turkey being opposed to Finland and Sweden joining NATO, it seems that the alliance will eventually welcome the two new members and hence increase security for the Nordic countries as well. This will be a huge change because Finland, which shares a border with Russia, will now also have the advantage of collective defense. The “vacuum for security” in that region will now be filled. Moreover, according to Theresa Fallon, founder of The Center for Russia Europe Asia Studies (CREAS), should the decision go through “this is going to be very hard for Putin to explain to the public, that instead of pushing back at NATO, it’s actually got two new members.”

Sources

Al Jazeera. ““Historic Moment”: Finland and Sweden Formally Apply to Join NATO.” Www.aljazeera.com, 18 May 2022, http://www.aljazeera.com/news/2022/5/18/finland-and-sweden-submit-applications-to-join-nato. Accessed 22 May 2022.

—. ““Military Tension Will Rise”: Russia Chides NATO Nordic Expansion.” Www.aljazeera.com, 16 May 2022, http://www.aljazeera.com/news/2022/5/16/russia-wont-put-up-with-natos-nordic-expansion-minister. Accessed 22 May 2022.Henley, Jon. ““A Historic Change”: How Sweden and Finland Trod Separate Paths to Nato.” The Guardian, 20 May 2022, http://www.theguardian.com/world/2022/may/20/sweden-finland-separate-paths-to-nato.

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Analysis

Turkey’s Financial Setback

What happened?

Istanbul: State data revealed that the annual inflation rate in Turkey has surged to a 20-year high of 48.7% despite months of assurances by President Recep Tayyip Erdogan that the soaring figures were just temporary and that his government could ease the pain on Turks weighed down by rising living costs. Turkish citizens are the most affected since prices of consumer goods rose by 11.1% from December to January, according to the Turkish Statistical Institute. Analysts predicted that the prices of consumer goods increased between 9% and 10%.

Moreover, the Turkish lira (Turkey’s currency), lost 44% of its value in 2021 in a rout driven by the president’s refusal to raise interest rates as the inflation consistently climbed. Evidently, the currency’s turbulence has hit Turks hard, as the value of their salaries dropped and costs of goods and energy dramatically increased. The president has prioritized credit and exports, while constantly arguing against economic orthodoxy that raising interest rates worsens inflation rather than taming it. 

How did this happen?

Nations around the world have been grappling with price spikes caused by supply chain snarls and shortages of raw materials due to COVID-19. However, inflation in Turkey has been exacerbated by a dramatic fall in the value of the Turkish lira, which lost more than 40 percent of its value against the United States dollar last year. The lira’s crash in the final quarter of 2021 was triggered by a series of central bank interest rate cuts championed by Turkish President Recep Tayyip Erdogan, who still insists that lower interest rates combat rising inflation – a view that runs opposite to mainstream economic theory, which holds that lower borrowing costs typically increases price pressures thus leading to lower purchasing power in all.

“We are in sorrow to see our yearly inflation hitting 36 percent,” said Erdogan. “Nevertheless, as a government that managed to decrease inflation to 6 percent, we will repeat our success to protect Turkish citizens from financial troubles.”

Attempt to combat inflation by increasing minimum wage

To help cushion the blow of rising prices, the Turkish government raised the minimum wage by 50 percent and boosted the government match on private contributions to public pensions. 

However, the minimum wage hike was also accompanied by price increases in regulated sectors of the economy. Electricity tariffs have shot up by 125 percent for higher-demand customers and 50 percent for lower-demand residential customers. Natural gas prices have gone up 50 percent for industrial use and 25 percent for residential use. The cost of public transportation in Istanbul has also seen a drastic increase by 36 percent.

Therefore, the government has attempted to assist the poor in this financial crisis while the burden has partially fallen on middle-class consumers.

Politics and Inflation

Turkey’s opposition parties have seized upon the variation between official TurkStat inflation numbers and what many members of the public and experts think. Ali Babacan, a former Erdogan ally who served under him as finance minister and now heads the Democracy and Progress Party, called TurkStat the “Institute for Adjusting Numbers” in a tweet shortly after the December inflation figures were announced.

Last month, during a live television broadcast, the head of the largest opposition party, Kemal Kılıçdaroğlu, attempted to visit TurkStat’s head offices in the capital Ankara to inquire about how inflation is being calculated, only to be turned away. Thus, it is evident that the Turkish government  is trying to hide their numbers while reassuring the citizens through futile attempts.

A new economic model?

Treasury and Finance Minister Nureddin Nebati outlined Turkey’s new economic path to investors in London, pledging to keep the exchange rate stable, bring inflation down to single digits and keep dollarization at bay.

Speaking to investors and bankers in meetings, Nebati also said that the government would soon announce a new scheme to get households to convert holdings of gold into Turkish lira.

President Recep Tayyip Erdoğan has been endorsing a model based on lower borrowing costs, which he says will boost production, employment and exports, and also eventually help Turkey solve its chronic current account deficit problem and contribute to stabilizing the Turkish lira.

Gold Savings Scheme

Two investors who attended meetings said the minister had told them about the plans to ensure part of the $250 billion-$350 billion worth of gold held by Turkish households would find its way into the domestic savings system.

“The important thing for us is the stabilization in the exchange rates. With this package, we will have put the gold under-the-mattress into the system, which is estimated to be around 5,000 tons of gold equivalent to 250-350 billion US dollars (the “under-the-mattress” term refers to a long-held tradition in Turkey of turning to gold to safeguard wealth and storing it at home).

A certain amount of this will support the Central Bank of the Republic of Turkey (CBRT) and meet the need for foreign exchange, he noted. “But most importantly, it will shore up the Turkish lira, which forms the basis of our model.” The government will make announcements soon on how to convince people to let go of their gold holdings. An investor stated that if the gold finds its way back into the banking system, it will certainly help to broaden the monetary base in terms of the Turkish lira.

Borrowing

Investors are also eyeing Ankara’s foreign borrowing plans. The Treasury did not immediately comment on the possible sale. According to Refinitiv data, Turkey is due to pay off a $2 billion eurobond on February 21th and a $1.1 billion domestic bond on February 25th.

Nebati also said at investor meetings that the government had held very productive talks with Abu Dhabi, Saudi Arabia and Israel in recent days, and swap lines were being agreed upon. He declined to give further details.

In conclusion, more details on the new economic model are yet to arrive. Most of the government’s efforts have gone in vain – the Turkish citizens have been hit hard due to this crisis with a hike in the prices of basic necessities such as gas, food and transportation.

Sources

https://www.dailysabah.com/business/economy/turkey-pitches-new-economic-model-signals-new-steps-to-shore-up-lira

https://www.aljazeera.com/economy/2022/1/7/just-how-bad-is-inflation-in-turkey-it-depends-on-who-you-ask#:~:text=The%20lira’s%20crash%20in%20the,ho

https://www.dailysabah.com/business/economy/turkeys-inflation-highest-since-2002-hitting-487

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Analysis

Georgia’s Ambitions for a Regional Transit Hub

Introduction

Since the dawn of time, Georgia has remained at the crossroads of Europe and Asia. It lies in the Caucasus and is the only country in the region that has access to the sea. The government of Georgia has realized the full potential of turning Georgia into a transit powerhouse. 

Over the past few years, Georgia has been heavily investing in improving it’s connectivity with its neighbors, including Russia, by building higher capacity highways and repaving pothole-ridden roads. By 2032, it is expected that Georgia’s main economic artery, the E60, will be motorized. This corridor will allow for more traffic on the E60, or S1, the only artery that links west to east Georgia. 

A picture of the E60 currently in Zestafoni. 

Present Situation

Currently, the E60 is full of heavy duty trucks while being an open access two-lane road. The road is prone to damage and often closed due to the weather. This weakens Georgia’s main economic artery as it limits the ability to exchange capital and goods. Therefore, it also raises the costs of companies to ship across the country or to other countries. This results in many shortcomings such as limiting Georgian exports and hampering the prospects for many companies here.

In turn, this makes Georgia reliant on foreign imports, which means that Georgia consistently runs a current account deficit. To be honest, Georgia has been running a trade deficit since gaining independence. Therefore, the Georgian Lari must be strong in order to make imports cheaper, otherwise there will be imported inflation triggered by rising import prices. 

Plans of the Georgian Government

With this in mind, the Government of Georgia has decided to convert the E60 into a motorway which will allow for faster transits between Azerbaijan and Turkey, as well as improving the Georgian military road S3. 

Current roadmap of Georgia 

This will reduce the cost of transportation of goods and capital, therefore, reducing the likelihood of imported inflation, along with increased competitiveness of Georgian firms as costs will be reduced. Other smaller upgrades on the S12 and S2 are underway which will further reduce the costs of transportation in Georgia which will help Georgian firms and make Georgia a transit powerhouse in the Caucasus.

Conclusion

A comparison of Georgia to its neighbors. 

Regardless, there is much work to be done as shown above. This can be touted as a success in increasing the potential output of Georgia, but it is hard to say this will help increase it to its full potential as Georgia still needs a lot of work in many areas of infrastructure which the Government, in its new 10 year plan, has laid out. With further improvements in these fields, it is safe to assume Georgia will increase its potential output and keep growing at a rapid pace. 

Sources

https://tradingeconomics.com/georgia/current-account

https://agenda.ge/en/news/2021/2082

https://www.oecd-ilibrary.org/sites/c9c594ac-en/index.html?itemId=/content/component/c9c594a%20c-en

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Weekly Summaries

3rd of January – 9th of January

Situation in Sudan

Last week, Sudan’s military and security forces re-gained complete control over the country. The military leader promised to form “an independent government,” after the civilian prime minister Abdalla Hamdok left the country last Sunday, leaving the country in chaos. Protests were met with security forces, especially in the capital, Khartoum. According to the New York Times, at least 57 people died.

Other News

  • There was an assasination attempt on Haiti’s President over the weekend, which he survived
  • Turkey’s year-on-year inflation reached 36% in December, a 19-year high
  • Apple’s value as a company has tripled since 2018 when it recently became the first company to become a $3 trillion company
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Weekly Summaries

29th of November – 5th of December

Turkish Lira further loses value

After the Lira crashed last week, protests broke out across Turkey. The crash comes after months of worsening economic problems that already caused the currency to lose more than 45 percent of its value from the start of 2021. Last week alone, the currency devalued by around 20 percent. The police have responded by detaining protestors: last Wednesday the police detained at least 70 people in districts of Istanbul who were protesting the “government’s management of the economy,” according to the New York Times.

American delegates to boycott 2022 Winter Olympics

This weekend the Biden administration announced that no American delegates would be attending the 2022 Winter Olympics in Beijing. American athletes, however, are not affected by the boycott and will be allowed to compete in the Olympics. Since the announcement, New Zealand and Australia have joined the U.S. in the diplomatic boycott.

Other News

  • Four students died at the most recent school shooting at a high school in Michigan, United States. The suspect is a 15-year old who now faces murder and terrorirsm charges
  • Austria’s former chancellor, Sebastian Kurz, who is currently under investigation for accusations that include corruption, announced last week that he was quitting politics
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News

The G20 Summit in Rome, Italy

Who attended?

These past few days, the political leaders of the G20 member countries met in Rome to discuss a handful of issues. Some of the politicians who were present are: 

  • Alberto Fernandez (Argentina)
  • Scott Morrison (Australia)
  • Jair Bolsonaro (Brazil)
  • Justin Trudeau (Canada)
  • Xi Jinping (China)
  • Emmanuel Macron (France)
  • Angela Merkel (Germany)
  • Mario Draghi (Italy)
  • Narendra Modi (India)
  • Joko Widodo (Indonesia)
  • Manuel Lopez Obrador (Mexico)
  • Moon Jae-in (South Korea)
  • Vladimir Putin (Russia)
  • Salman bin Abdulaziz Al Saud (Saudi Arabia)
  • Cyril Ramaphosa (South Africa)
  • Recep Tayyip Erdogan (Turkey)
  • Boris Johnson (United Kingdom)
  • Joe Biden (United States)

Joining these political leaders was the President of the European Commission of the European Union, Ursula von der Leyen, and President of the Council of the European Union, Charles Michel. Antonio Guterres, general director of OMS, specifically discussed financial issues relating to the health of the world population.

What was discussed?

So, first and foremost I want to say my thoughts on the possible solutions that will be discussed in the hopes of resolving some of the world’s current Economics problems.

  1. The European Union will invest in the eco-transaction for social enterprises, which are present in nations like Germany and Netherlands, but not in Turkey or in the United States at the moment. Mario Draghi was noted as saying that the Turkish president did not consider the political circular economy. Therefore, there will be no equality in the sense of financial economics in the future, and as a result there will be more discrepancies in terms of environmental sensibility. 
  2. The markets will be more open to Artificial Intelligence. This is especially important as AI is now considered fundamental for new inventions and innovations. 
  3. The United States will invest more on the prototype of financial democracy. In general, it has been noticed that Biden’s government is more concerned with solving population problems than Trump’s government. 
  4. China will be the first world power nation. Compared with all other international markets, China is one of the best markets for social capital that Chinese companies can invest with and also for AI (Artificial Intelligence).

Conclusion

In general, I believe there will be considerable investments in innovation, but I also think there will be areas that will see more progress than others.

I believe the central areas will be capital growth, new health solutions and eco transactions, with a greater focus on the rights of employees. Meanwhile , I think that the semi-peripheral areas will be capital growth, new health solutions but also more consideration of people’s rights on goods and services and on working issues of industries. In my opinion, the periferica areas will be debts and stagflation. It is also possible that there will be problems about having credits as paying back debts may become difficult to do. However, also inflation and financial stagnation are likely to lead to many problems, meaning that no investments will be made into sustainable finance. 

Let’s hope there will be a graduating consideration of nations that are in critical situations, like Perù, Mexico, Spain, and many African countries.

Sources

  1. https://www.consilium.europa.eu/en/
  2. di Taranto, Giuseppe. “The History of Economics.” (2012)
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Weekly Summaries

23rd of August – 29th of August

Afghan refugees and an increasingly dramatic situation at the airport in Kabul

Thousands of people are still waiting at the airport in Kabul for a flight out of Afghanistan and the August 31st deadline to complete the Afghanistan operation is fast approaching. To make the situation even more urgent, Taliban leaders rejected President Biden’s suggestion to extend the deadline for the completion of the operation. Last Wednesday, President Biden then announced that the U.S. was “on track” for a military departure from Afghanistan on August 31st.

On Thursday, two suicide bombers outside of Kabul’s airport killed at least 13 U.S. troops and many Afghans, including children. The Islamic State has since claimed responsibility for the attack. President Biden vowed retaliation, saying “we will not forgive.”

This past week reports also surfaced which state that weeks before Kabul fell to the Taliban, tens of thousands of Afghans were already traveling across Iran, hoping to cross Turkey to reach Europe. However, President Erdogan of Turkey has claimed that Turkey will not be “able to shoulder the additional burden” as it has already taken in 5 million refugees. Last week alone, more than 1,400 Afghans who were in Turkey were rounded up and pushed back by the police in a single operation.

Other News

  • The IMF (International Monetary Fund) gave financial aid to poor countries worth US $650 billion to help them “pay down debt and withstand the costs of combating the coronavirus pandemic,” the New York Times reports
  • The highest point on Greenland’s ice sheet has never experienced rainfall that is until last week
  • To prevent Belarusian migrants from entering, Poland and Lithuania are planning to build fences along their shared borders with Belarus, according to the New York Times
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Online Courses

2nd of August – 8th of August

The Case of the Belarusian sprinter Kristina Timanovskaya

The Belarusian sprinter Kristina Timanovskaya was first under the protection of the Japanese government after she criticized her coaches for registering her for the wrong event, according to the New York Times. Belarus tried to send her home but she was scared that she would be arrested upon her return. Timanovskaya has since stayed at the Polish embassy, hoping to seek political asylum in Poland, which has since been granted to her and her husband by Poland. Two Belarusian coaches who were apparently involved in the attempt to get her to leave Tokyo for Belarus have been expelled from the Olympic Village.

Wildfires in Turkey and Greece

Wildfires in Turkey have killed at least six people and forced tens of thousands from their homes. President Erdogan has also received criticism over his handling of what can be called Turkey’s worst wildfires in decades. Greece has also been badly affected by the wildfires, recording its hottest temperatures on record with thousands fleeing their homes. The wildfires have since also reached the island of Evia and ancient Olympia, the birthplace of the Olympic Games. The New York Times reported that local authorities and the army “dug firelines around the archaeological site” in an attempt to prevent the fires from destroying it. A thick pall of smoke also hung over Athens last Thursday, meaning that people were instructed to stay indoors until the smoke cleared. 

Other News

  • The Lazio region of Italy, which includes Rome, experienced a cyberattack and left it unable to offer vaccination appointments online
  • New York’s Governor Andrew Cuomo faces criticism and calls for him to resign after it became public that he sexually assaulted 11 women. Governor Cuomo, however, has denied these accusations.
  • “American forces stepped up a bombing campaign in Afghanistan,” according to the New York Times
  • Over 200 million cases of COVID-19 have now been recorded around the world, as of Thursday
  • Ebrahim Raisi, the new President of Iran, was inaugurated this past week
Categories
Weekly Summaries

26th of July – 1st of August

Chaos in Tunisia

The President of Tunisia, Kais Saeid, tried to seize power in what some call a coup. He announced that he would fire the prime minister and has already suspended Parliament. However, so far it seems that his success is very limited, although many Tunisians expressed their support. Tunisia has been a democracy since the Arab Spring revolutions.

Other News

  • A landslide in India killed 9 people, most of them tourists. Furthermore, monsoons on the western coast have also killed more than 164 people so far.
  • France has been witnessing many protests against the so-called “Covid Pass” policy
  • North Korea and South Korea have — after 14 months of silence — reopened diplomatic and military hotlines between the two countries
  • Flash floods in Afghanistan have killed at least 80 people, but the search for survivors still continues
  • President Biden announced that EU citizens will continue to be barred from entering the U.S., citing fears that the Delta variant would be spread, despite the fact that U.S. citizens are allowed to enter EU countries, as long as they are fully vaccinated
  • Forest fires in Turkey and wildfires in Greece have had devastating consequences for the people living in the surrounding areas

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