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Reformist deputy PM's wings clipped in new Turkish government
May 26, 2016 / 12:52 PM / 2 years ago

Reformist deputy PM's wings clipped in new Turkish government

ISTANBUL (Reuters) - Turkish Deputy Prime Minister Mehmet Simsek, an economic reformer whose reappointment this week had initially reassured investors, will see his responsibilities shrink in the new cabinet, with some transferred to an ally of populist President Tayyip Erdogan.

Turkish Deputy Prime Minister Mehmet Simsek poses during an interview with Reuters in Ankara, Turkey, December 23, 2015. REUTERS/Umit Bektas/File Photo

Simsek’s reappointment on Tuesday relieved investors nervous that economic management might increasingly fall into the hands of Erdogan advisers, who champion growth policies at the expense of badly-needed reforms.

But while the former Wall Street banker will continue to oversee the Treasury and central bank, he will no longer be in charge of regulating commercial lenders or the capital markets, government spokesman Numan Kurtulmus said late on Wednesday.

Those responsibilities will instead pass to fellow Deputy Prime Minister Nurettin Canikli, who has close ties to Erdogan.

“The impact of Mehmet Simsek leading the economic team was short-lived,” Is Investment said in a note to clients.

“His job description in the (outgoing) administration included the expression ‘general coordination of economic affairs’, which was not included in his new job definition, increasing the risk premium,” it said.

The lira currency weakened to below 3.0 to the dollar on Tuesday, but was somewhat firmer on Wednesday. Stocks meanwhile underperformed emerging markets peers, which were largely up, dropping 0.36 percent by 1130 GMT.

Simsek - who rose from poverty in provincial Turkey to work at UBS on Wall Street and Merrill Lynch in London - first joined the cabinet as economy minister in 2007, going on to be finance minister and then deputy PM in charge of economic policy.


Although Turkey’s progress on structural reforms, including overhauling its labour market and boosting its savings rate, has been sluggish, Simsek is seen as one of relatively few remaining government figures committed to a reform agenda.

New Prime Minister Binali Yildirim, a close confidante of Erdogan for two decades, named his cabinet on Tuesday and has made clear his priority is changing the constitution to give Erdogan the full executive powers he wants.

Finance Minister Naci Agbal told Reuters on Tuesday the government would take “swift and bold” economic decisions this year. But economists fear its focus will be on winning support for constitutional change, making unpopular reforms less likely.

Some economists have dismissed Simsek’s return as window-dressing for investors. But Tim Ash, a strategist at Nomura, said there was still a critical mass of “decent reform names” in the administration, including Simsek, Agbal and Development Minister Lutfi Elvan.

“Erdogan is still not yet a Chavez or Kirchner,” he said, referring to the former Venezuelan and Argentinian leaders known for their economic populism and hostility to foreign investors. “He understands the importance of sound public finances and values foreign investment.”

Additional reporting by Nevzat Devranoglu in Ankara and Ayla Jean Yackley in Istanbul; Editing by Nick Tattersall and Ralph Boulton

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