“Our economy is only as successful as we are in the area of the judiciary. If the [current] weak picture [with regard to the rule of law] continues, we will end up in a place where we long for the situation that we currently have, both in the areas of democracy and the economy. The rule of law is a fundamental necessity for prosperity and democracy, just as food and water [are to sustain life],” the economy tsar remarked during a panel discussion on Wednesday in an outspoken criticism of the state of the judiciary.
During his speech at a “Bab-ı Ali [Sublime Porte]” meeting addressing the future of the Turkish economy, organized by a think tank with the same name in İstanbul, Babacan publicly criticized the political interference in the judiciary in Turkey and warned about its side effects on the economy. “If lower and higher courts issue contradictory rulings, and if hearings last a long time, this creates a very bleak picture for the economy and the business world,” Babacan said.
“Regardless of what we have accomplished in the economy or our claims about our achievements, if there are concerns raised over whether Turkey is a constitutional state or not, then this is a [serious] problem in itself,” the minister added.
Stressing the importance of an independent judiciary, Babacan maintained: “The rule of law should certainly act within the framework of universal legal norms, a constitution and, maybe more importantly, conscience. The law has a language, a spirit. That’s why the conscience part is so important. We demand a system that is based on universal norms of the rule of law. We want our Constitution to be easy to understand, a simple one. We want our laws to be short, compact and understandable. Along with this, we say the legal system should operate independently and impartially.”
These comments are not the first time that Babacan has voiced concern about the rule of law in Turkey and its effects on the economy. On April 27, Babacan said that the economy would not grow if the rule of law is no longer in place.
There has long been media speculation that Babacan is uncomfortable with President Recep Tayyip Erdoğan and his arbitrary interventions in state institutions. Babacan has recently diverged with Erdoğan on certain issues, such as the interest rate policies of the Central Bank of Turkey. Along with external pressures such as expectations of a possible interest rate hike by the US Federal Reserve in June, the row between Erdoğan and supporters of an independent central bank have pushed the Turkish lira down to historic lows against the US dollar on multiple occasions over the last few months.
The Taraf daily claimed late in February that Babacan and central bank Governor Erdem Başçı had submitted their resignations to Prime Minister Ahmet Davutoğlu amid splits in opinion with Erdoğan, but that Davutoğlu convinced them to stay in their posts.
The deputy prime minister is widely credited for being one of the architects of Turkey’s economic growth and successes over the past decade and is respected in international circles. Babacan will not run in the upcoming parliamentary election slated for June 7 due to his party’s three-term limit that prevents AK Party lawmakers from being elected to office more than three times.
Babacan was also at the center of criticism by pro-Erdoğan columnists and the pro-government media when Yiğit Bulut, one of Erdoğan’s top economic advisers, contradicted Babacan about a possible sale agreement between the state-owned Ziraat Bankası and Bank Asya, the lender that Erdoğan sees as an institution belonging to the so-called “parallel structure” within the state.
Appearing on a TV station in August 2014, Babacan made remarks about ongoing talks regarding the possibility of Ziraat Bankası purchasing Bank Asya. On the same day, however, Bulut made a live statement on another TV station in which he said: “There are no actions, attempts or even investigations into the possibility of Ziraat Bankası purchasing Bank Asya, as far as the prime minister knows. There has been much speculation in the wake of the statements by Minister Babacan. And in fact, Bank Asya’s value rose some 10 percent — or in other words, TL 100 million. I am calling on the SPK [Capital Markets Board] to take this matter up. Who bought these Bank Asya shares?”
Bank Asya later on was transferred to the control of state-run Savings Deposit Insurance Fund (TMSF) after a regulatory decision made by the Banking Regulation and Supervision Agency (BDDK) citing a lack of transparency in the management.
After the Bank Asya decision, several foreign-owned banks have withdrawn from the country and prominent domestic firms have postponed their planned public offerings due to unfavorable market conditions, hinting at measures taken by the private sector against what are seen as arbitrary decisions by the government. Among the companies that have decided to delay their planned public offerings are Finansbank, the Turkish subsidiary of the National Bank of Greece (NBG), Turkish Aerospace Industries (TAI) and the Turkish Petroleum Refineries Corporation (TÜPRAŞ). They all cited either fluctuations in financial markets or unsuitable market conditions as contributing to their decisions.
In addition, global banking giant Citigroup sold its stakes in Turkey’s Akbank early in March, even though it lost money in the transaction.
A spokesperson from the Royal Bank of Scotland (RBS) also said in March that the bank is exploring options for the sale or winding-down of its corporate and institutional banking operations in Central and Eastern Europe, the Middle East and Africa, including Turkey.
To make matters worse, it has long been suspected that the UK-based HSBC would halt operations in Turkey. The group chief executive of HSBC Holdings PLC, Stuart Gulliver, issued a strong warning in February regarding the bank’s business in Turkey, urging the Turkish branch to fix certain problems before “more extreme” measures are taken. HSBC Turkey announced on Thursday that it had recorded a TL 32 million loss in the first quarter of this year.