Is Hafize Gaye Being Treated Too Harshly?

The German press has turned its lens toward Central Bank of Turkey Governor Gaye Erkan, wondering if even the head of the Central Bank cannot find a place to live and is staying at her mother's house, then what must the situation be like for the average citizen? 

The economic crisis in Turkey is so severe that I don't think it occurred to any of us that Hafize Gaye is also a human being, and that with a personal touch, or perhaps even a joke, she might actually be trying to show that she sincerely understands Turkey's situation, or that she is someone with enough human empathy to talk about the economy with her apartment superintendent.

Looking at Hafize's background and career path, it is certainly not hard to guess that she has enough money to rent a home for herself. And we can be sure that she does not determine the country's monetary policy based solely on information she receives from a conversation with an apartment superintendent.

After living abroad for a long time, it is not strange for her to want to stay with her mother, who is a physics teacher. In all likelihood, her mother is not living in a 2-bedroom apartment either.

In this severe economic crisis, shouldn't the issues that Turkey really needs to be concerned about be a bit different?

Will Ms. Gaye, together with a team of competent economists in their field, be able to use the necessary political and economic instruments fully and with good-faith cooperation, accompanied by independent economic policies?

Considering the problems in the current period, will the Central Bank be given the authority to take measures independently in order to implement long-term precautions?

While it is known that the way to recover from inflation lies in interest rate policy, will ideological approaches take precedence over economic policies?

Without being sure of the answers to all these questions, it is not difficult to guess that the brilliant career of Hafize Gaye Erkan alone will not be enough.

This Is How the German Press Begins Its Reviews of Hafize Gaye Erkan

Gaye Erkan, seen as a key figure in how Turkey will cope with its economic imbalances, was born in Istanbul in 1982. After graduating with honors from Boğaziçi University, she went to the US on a scholarship to study financial economics and mathematics. Erkan, who held important positions in institutions such as First Republic Bank and Goldman Sachs in the US, is expected to apply the experience she gained during the period when First Republic Bank was experiencing liquidity difficulties to Turkey's economic problems.

The sentence Ms. Gaye said with the experience she gained at First Republic Bank is noteworthy: "We have also learned that liquidity is not necessarily equivalent to solvency."

This means the following: Just because a firm has enough money right now does not mean that this will be the case in the future. When it comes to solvency, it is not enough to state only the current situation in the economy. For a firm to build trust in the market, it must create the impression that its solvency will continue in the future.

In an interview Gaye Erkan gave to Bloomberg a year ago, she said, 'We all have a limited time span in life, so we must optimize everything we do in life in the best way possible.' These words from Gaye Erkan sound like a life philosophy. At the time she gave this interview, Gaye Erkan was planning to work at Greystone, an institution that provides loans focused on commercial real estate, and she had no trouble attracting the attention of firm owners with her brilliant career. However, although Erkan's brilliant career and the successes she has achieved so far are seen as a promising step against Turkey's economic problems, it is stated that Ms. Gaye's success is also closely related to how independently she can act in the decisions she makes, emphasizing the negative effects of the Central Bank not being independent on economic stability.

Hafize Gaye Erkan's Determination in Monetary and Interest Rate Policies

Gaye Erkan, who has not deviated an inch from the strict policies she implemented regarding interest rate hikes, raised the policy rate directly from 8.5% to 15.0% in June when she first took office. In November, she put more pressure on the Turkish Lira and increased the policy interest rate to 40% with an 8.5-point hike in the policy rate. Her approach to reducing economic imbalances with "monetary policy tightening measures" is important for understanding Erkan's policies.

What Does the International Economy Say?

Looking at the comments and economic solution proposals made by international economic experts about Turkey in recent months will be useful for understanding Hafize Gaye Erkan's monetary and policy interest rate applications.

DEKABANK Asia Expert Janis Hübner's June 9, 2023 Turkey Economy Analysis

• Contrary to the goal of becoming one of the world's ten largest economies, Turkey has fallen from 17th to 19th place in the economic rankings. The expectation of a per capita income of 25,000 dollars did not materialize; instead, it fell from 11,300 dollars to 9,300 dollars. The situation was further worsened by the earthquake that occurred in southern Turkey in February, in which more than 50,000 people lost their lives and three million people were displaced.

• The lack of confidence of Turkish and foreign investors in the Turkish Lira has further weakened the currency. 'In the opinion of most experts, the fact that the President is interfering in monetary policy has further shaken confidence,' says Janis Hübner.

• Experts at the US bank JPMorgan estimate that the Turkish Lira could lose more value after the elections, and that the Turkish Lira, which was 20 lira against the dollar as of September, could fall to the 30 Turkish Lira level."

• Among the measures taken by President Erdoğan against the economic decline are borrowing and interest rate cuts. According to the International Monetary Fund (IMF), Turkey's public debt has quadrupled in the last five years to reach approximately 250 billion dollars. The IMF projects more than 1.2 trillion dollars in debt for 2027.

• The fact that the Central Bank has lowered the policy rate by 10 points since September 2021 has further exacerbated inflation. However, the general economic view is that significant interest rate hikes must be made to cool down economic activity and bring inflation under control.

• However, President Erdoğan sees low interest rates as an opportunity for companies to invest more. Nevertheless, increasing lending and the resulting increase in demand and prices are creating a constant inflationary spiral in the economy.

• According to Hübner, the biggest challenge for the Turkish economy is to restore confidence in the Lira. Given the high current account deficit, high external debt, and low foreign exchange reserves, this is a difficult task.

• The current government is trying to support the public for now by providing billions of liras in energy aid and increasing the minimum wage and civil servant salaries. Within the scope of these supports, the Central Bank sold at least 100 billion dollars in foreign currency last year to support the Lira. However, these measures only provide temporary stability.

• 'As a result, it is necessary to allow the Lira to depreciate rapidly and at the same time increase interest rates significantly. In addition, the government needs to give the Central Bank its independence back,' assesses Hübner.

The Only Issue Is Not the Bread That Cannot Be Brought Home

In the environment of an economic crisis that the Turkish people feel the effects of more intensely every day, the only issue is not the bread that cannot be brought home. Increasing criminality, young people trying to make money the easy way, people who see prostitution and violence as a solution, suicides, the decline in education, a public whose sociological and psychological structure is rapidly deteriorating and who have reached the brink of madness. We know very well that not only individuals but also societies can go mad, and this level of madness can wipe away all the human values we have created so far and all the civilized features of a civilized society like an unstoppable flood. 50 years from now, our children could wake up to a country we don't recognize at all. It is as if we are all in a nightmare together and cannot wake up. We need to wake up to the seriousness of the matter together.

In this vein, rather than living in a mansion with bodyguards, Hafize Gaye Erkan living in an apartment with her mother, who is a physics teacher, seems much more beneficial when we consider the conditions and requirements of the difficult task she is in. In our country, where the Middle Eastern-leaning patriarchal order is rampant, we are not unaware that the task undertaken by such a successful young woman is not easy at all, and that while the difficulty of the task is a responsibility area in itself, she will also face deliberate obstacles. It is hoped that she has sincere ideas for her country and that she can establish the economic relief that the nation urgently needs together with her team.