The duke of moral hazard, encore
Prime Minister Recep Tayyip ErdoÄan never ceases to amaze me. Just as I was thinking he had set a new standard in damaging the economy by attacking the Central Bank, he raised the bar by announcing a vast debt amnesty.
The new draft law, which was sent to Parliament on June 2, is restructuring a number of debts, from traffic tickets to social security insurance premiums and taxes. Cash taken from businesses by their owners is also included. ErdoÄan cronies who were scrambling to come up with millions to buy a newspaper on the PMâs orders will now be able to formalize all the missing cash from their companies. The bribes registered in Reza Zarrabâs excel sheet will be legalized as well.
A government official told Reuters the law âhad been prepared by ruling party lawmakers at ErdoÄanâs biddingâ without consultation with the Ministry of Finance. Along with his row with the Central Bank, this move shows ErdoÄan is increasingly leaving Deputy Prime Minister Ali Babacan and Finance Minister Mehmet ÅimÅek out of the economic decision-making process and relying more and more on his own judgment â and that of his chief economic adviser, Brave Cloud.
A second government official summarized the gist of the new law by noting it was âfulfilling the requirements of the current political environment, not necessarily those of the economy.â As I argued in Mondayâs, June 2, column ErdoÄan needs growth to make sure he gets elected President in August. Thatâs why he has been pressuring the Central Bank to cut rates.
He also needs money to boost growth. Public consumption and investment have in fact been contributing significantly to growth since the last quarter of 2012...
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