Making the click-through worthwhile: In today’s Jolt we take a look at unfolding crises in Turkey and the U.K.
Earth to Erdogan: Raise Rates
In one week, the Turkish lira has fallen by more than 20 percent against the U.S. dollar, and yields on Turkey’s sovereign debt have skyrocketed as investors demand greater compensation for the risk of holding Turkish bonds. Turkey is quickly approaching an outright financial crisis.
The trouble worsened, but did not start, in late July, when relations between the U.S. and Turkey soured over Turkey’s detention of Andrew Brunson, an American pastor, on terrorism charges. (American observers agree the charges are baseless.) Diplomatic talks between American and Turkish officials failed to resolve the situation. Turkey began demanding that the U.S. extradite Fethullah Gulen, the leader of an eponymous dissident movement who currently resides in Pennsylvania, in exchange for Brunson. Recep Tayyip Erdogan, Turkey’s president, insists that Gulen is responsible for fomenting the failed 2016 military coup against the government, but Gulen is a longtime adversary of his and Erdogan has not produced compelling evidence to justify his assertion. So the U.S. abandoned its pursuit of a diplomatic solution and turned to economic measures to raise the pressure. “Relations with Turkey are not good at this time!” tweeted President Trump last week.
Trump doubled tariffs on Turkish metals last week, shaking markets and angering Erdogan. Today, the Turkish president announced that the country would boycott American electronics, temporarily saving the lira from its fall. Erdogan has accused Trump of intentionally sabotaging the Turkish economy, but if Erdogan wanted a stable domestic economy there are plenty of measures he could have taken on his own. Right now, inflation sits near 16 percent and the overnight interest rate at 17.75 percent. Erdogan has pressured the central bank to keep real rates low to stimulate the economy. This is an unsustainable recipe that was bound to curdle eventually. A significant rate hike could spell trouble for business activity, sustained as it has been by cheap credit. But it would help stop the lira’s free fall and, perhaps as important, it would convince observers that Erdogan is committed to avoiding a crisis.
Instead Erdogan has declared, “Interest rates are an exploitation tool that makes the rich richer and the poor poorer.” This from the man who recently appointed his son-in-law to be finance minister, a position for which he was unqualified. It is no wonder investors have little faith in his government to manage its way out of a financial crisis.
What are the implications? Turkey’s economy is the 17th largest in the world. A default on its sovereign debt — a remote scenario, to be sure — would reverberate. A Bloomberg report runs through the exposure various emerging-market countries have to the Turkish economy, noting that while “fear that the Turkish meltdown will keep punishing emerging markets resurfaced Monday . . . many analysts say there are few fundamental reasons” that Turkey’s economy would sink the entire developing world. The risk to developed-world economies at this point seems attenuated.
But the crisis between the U.S. and Turkey is more consequential. Would a NATO ally long considered critical to the alliance turning East represent a major reordering of the world order, or simply be a lagging indicator of what has long been a reality? In a June 30 article in Foreign Affairs, Brookings Institution senior fellow Amanda Sloat noted that while the U.S. was likely to apply more pressure, “Turkey’s strategic geography, NATO membership, and centrality to several U.S. regional objectives make the relationship one worth preserving.” “As Russia and other U.S. rivals benefit from the rift with Turkey,” she argued, “it is ultimately not in the interest of the United States to turn away from its challenging ally.” Yet the episode has brought old, inconvenient questions about Turkey’s natural allies to the fore once again. Steven A. Cook wishes good riddance to the relationship in Foreign Policy, writing that the “Turkish government is ambivalent about the Atlantic alliance, has found common cause with extremist groups, and stirred up trouble in the Gulf, Jerusalem, and the Red Sea.” Regardless, Trump has a stronger hand than Erdogan, and no doubt wants to send a message that the spurious imprisonment of American citizens will not be tolerated, but the situation is delicate.
Anti-Semitism in the Labour Party
Sam Knight has a comprehensive account of “Jeremy Corbyn’s Anti-Semitism Crisis” in The New Yorker. A representative paragraph:
Chakrabarti’s forty-one-page report [commissioned after Ken Livingstone said Hitler supported Zionism] concluded that the Labour Party was “not overrun” by anti-Semitism, but noted an “occasionally toxic atmosphere” inside the Party. It recommended that members not use slurs such as “Zio,” or “Hitler, Nazi and Holocaust metaphors, distortions and comparisons,” when talking about Israel and Palestine. Chakrabarti also called for a sense of proportion: inquiries of this kind should not automatically be reduced to a “witch-hunt” or a “white-wash.” She did not get her wish. At the press conference to announce the findings of the Chakrabarti report, in June, 2016, a pro-Corbyn activist accused Ruth Smeeth, a Jewish M.P. sitting in the audience, of working “hand in hand” with a right-wing newspaper to undermine the Party. Attacked with an anti-Semitic trope at an event intended to draw a line under anti-Semitism in the Party, Smeeth left the room in tears. Two months later, Chakrabarti accepted a peerage from Corbyn. The Board of Deputies of British Jews described her report as a “white-wash.”
Now Corbyn is back in the crosshairs after photos emerged of him attending a 2014 memorial service for Palestinians. Which Palestinians? Those killed in a 1985 Israel airstrike of Tunis. Oh, and members of terrorist group Black September who took hostage and murdered eleven Israeli athletes at the 1972 Munich Olympics. The Labour leader issued a statement that would have been better suited to denying teenage drug use than, say, honoring a group of terrorists: “I was present at that wreath-laying, I don’t think I was actually involved in it.” When Israeli Prime Minister Benjamin Netanyahu slammed Corbyn for the photo, Corbyn responded that what really deserved condemnation was “the killing of over 160 Palestinian protesters in Gaza by Israeli forces since March.”
Corbyn certainly seems disinclined to give an inch on this issue. This has led him to defend all sorts of actors within the party whose anti-Semitism appears undeniable. It has also, per Knight’s piece, produced anxiety among the U.K. Jewish community: Three Jewish newspapers took the unprecedented step of warning in a front-page editorial that a Corbyn-led government would pose “an existential threat” to Jewish life in Britain. The uncomfortable question lurking in the background is whether Corbyn is an anti-Semite. It seems arguable. But it also seems that every time the Labour party tries to prove it does not have an anti-Semitism problem, a new incident of anti-Semitism emerges. This demonstrates the truth of the charge, and I would argue that Corbyn has failed in his duty to clean up the party. Then again, maybe there really is a cabal of right-wing rabble-rousers in the U.K., and maybe they really are working hand in hand with Benjamin Netanyahu, and maybe the charges have been coordinated in an effort to undermine . . . oh, forget it.