by Simon Tilford
Japan has long had the highest level of public debt of any developed economy. The country’s public debt to GDP ratio is around 200 per cent of GDP, far in excess of even the EU’s worst performers. The collapse of real estate and equity prices in the early 1990s and the resulting banking crisis combined with a fast ageing population have condemned Japan to huge deficits, economic stagnation, and deflation, and an enormous rise in overall indebtedness. The country has been able to finance these deficits domestically, and very cheaply, because of Japan’s high domestic savings, and the readiness of Japanese savers to accept a very low rate of return. Deflation (and the strength of the Yen) has meant the Japanese have been willing to invest in Japanese governments bonds despite the low rate of nominal interest rather than invest abroad.
European governments have tended to be very dismissive of any suggestion that Europe is at risk of heading in a Japanese direction. Typically, they argue that the Japanese made egregious policy mistakes, which Europe would not repeat, such as failing to recapitalise the country’s banks quickly enough or tightening fiscal policy before the economic recovery had gained sufficient momentum. These criticisms of the Japanese authorities are probably fair. However, there are structural reasons for Japan’s plight, which many European economies share. And, despite protestations to the contrary, Europe is busy making the same policy mistakes as the Japanese authorities. Much of Europe is now on a Japanese course. Indeed, for some European countries the outlook looks much worse.
One group of EU economies should escape this predicament, largely as a result of favourable demographics. These include the Nordic economies, the Netherlands, and notwithstanding their current fiscal travails, France and the UK. Debt ratios will rise very strongly in all these economies, especially France and the UK, but these should be sustainable because their economies will continue to grow and they should avoid prolonged deflation. Although their populations are ageing, they will largely escape the demographic tsunami which is set to overwhelm much of Europe. For example, fertility rates in France and UK are over 1.9, and hence close to the replacement rate of 2.1 – the level needed to ensure stable populations. It is a similar story in the Nordics, while the picture is bit less favourable in the Netherlands, where the fertility rate is around 1.7.
A second group – basically comprising Germany (and probably Austria) – looks on course to emulate Japan’s experience. Germany has not experienced an asset price collapse equivalent to Japan, or the associated explosion in private sector indebtedness. But there are plenty of similarities between the two countries. Germany is experiencing a similarly drastic population ageing. The country’s fertility rate has been hovering around 1.3 for a generation, guaranteeing – in the absence of mass immigration – very rapid population decline. Like Japan, the country’s economic growth potential is now very low, domestic demand stagnant and deflationary pressures building. Germany also has badly undercapitalised banks. Like Japan, Germany can rely on large trade surpluses to partially offset the weakness of the domestic economy. High levels of domestic savings probably mean that Germany will be able to finance the borrowing domestically and be able to run up a similar debt burden to Japan without running into serious financing difficulties.
However, like Japan, this accumulation of debt will not be sustainable indefinitely. Japan’s household savings rate has fallen steeply in recent years as its ageing population starts to draw down on savings. The only reason the Japanese have been able to continue financing the fiscal deficit domestically is that corporate sector savings have ballooned, reflecting a collapse in investment. Once Japanese firms start to invest or their profitability declines, Japan will have to attract capital from abroad and foreign investors will demand a higher rate of interest than domestic investors are currently prepared to accept. Higher borrowing costs will spell serious trouble for a country as indebted as Japan.
A third group of EU economies – Italy, Portugal and Spain and of course Greece – looks set to fare worse than Japan. These economies combine the worst of all worlds. They have very weak public finances, fast ageing populations, very poor economic growth prospects and current account deficits – in the case of Greece, Portugal and Spain, very large ones. They cannot inflate their way out of their predicament, because they are members of the eurozone. Unlike Germany and Austria, they do not have surplus savings, and rely – to a greater or lesser extent – on foreigners to finance their deficits. Investors have already concluded that the debt dynamics of the weakest of the four – Greece – are unsustainable. Given their very poor growth prospects and dependence on foreign borrowing, Portugal and Spain will struggle to convince investors that they will be able to service steadily rising levels of debt. Italy looks somewhat less vulnerable than the other countries in this group in that it has a higher savings rate. However, it is hard to imagine Italian or foreign investors remaining sanguine about an unchecked build-up of Italian debt.
Simon Tilford is the chief economist at the Centre for European Reform.
Friday, April 30, 2010
Wednesday, April 21, 2010
Clameronism
From 'A Thousand Years of History: Britain in Europe 1066-2066', Oxford University Press, 2070.
Britain's 'national government' of 2010 was not unprecedented. Britons had accepted patriotic coalitions before during the First Great Recession and Second World War. Still, David Cameron's Conservatives fought hard in the aftermath of that year’s general election to preserve a minority government propped up by an unlikely assortment of regional parties and independents. But industrial unrest and a stuttering economic recovery ate away at investor confidence in Britain’s public finances. With pressure on sterling mounting, Cameron was finally forced to invite Liberal leader, Nick Clegg, into a national coalition.
Buoyed by a huge increase in the Liberal vote, Clegg at first opted for opposition. He bet that a swift second election was likely and that the Liberal Democrats would again double their seats. But the threat of a new financial crisis later that year spelt an end to normal politics. And Cameron's offer to give Vince Cable – the Liberals' ever popular shadow chancellor – the role of deputy at the treasury to help fight Britain's "economic blitz" could not be refused.
Clegg himself took on the post of foreign secretary, setting the scene for the coalition's first crisis: Britain's European policy. Despite howls of protest from the Conservative grass roots, Cameron agreed to "put on hold" Tory demands for a membership renegotiation that would have withdrawn Britain from EU policies on social policy, human rights and justice and policing. Instead, Britain pursued its interests in Europe based on a joint strategy called 'Leading critically: A new pro-Europeanism', swiftly dubbed "Clameronism" by The Economist.
For a time, the odd fusion of Cameron's detached euroscepticism and Clegg's pro-European stance worked well. Though he had to cope with a handful of defections from his own party, Cameron no longer had to fret about how he might extract himself from his pre-election promises on the EU when they proved undeliverable. Nor did he have to endure the ignominy of blocking Croatia's EU accession with demands for special concessions for the UK. And Clegg's ability to woo the European Parliament – where the Alliance of European Liberals held the balance of power – proved critical in protecting Britain from overly onerous financial regulation and restrictive laws on working hours. The Conservatives, meanwhile, could afford occasional gestures to stubbornly high eurosceptic sentiment at home.
In 2012, a British-French initiative set up St-Malo II, an EU defence avant-garde needed to cope with plummeting defence budgets. Later, President Strauss-Kahn supported the European Commission's drive to complete a functioning EU services market by 2017 in return for basic rules on corporate taxation. Ever closer Anglo-French partnership contrasted sharply with what became known as Germany's 'strategic lethargy', where Berlin glumly viewed continued European integration as a negative but lacked the will to take alternative initiatives.
It was ironic, then, that events in Germany were to trigger the unravelling of the Tory-Liberal consensus and the end of what many considered to be their unholy alliance. In the so-called 'Four Professors' crisis of 2013, a brittle hodgepodge of bailout guarantees needed to keep Greece and other countries in the euro were struck down as unconstitutional by the Bundesverfassungsgericht on a third attempt by a group of German academic economists. A mushrooming series of financial and political crises finally forced EU leaders to confront the question of European Economic Union (EEU) at a hastily convened Inter-Governmental Conference in early 2014.
The so-called Treaty of Prague – which established a centrally managed eurozone treasury fund equal to 3 per cent of EU GDP – irrevocably split the coalition. A major change to the EU's treaties with implications for its budget, the treaty still required ratification in Britain. Cameron was unable to contain a backbench revolt in his own party over what were perceived as overly weak safeguards secured on Britain’s ‘red lines’ by the foreign secretary. For his part, Clegg insisted on a protocol which would leave open the option that Britain might one day join the euro.
Both parties had previously committed to holding a referendum on Britain's future in Europe and now that too became unavoidable. The Liberals, campaigning with Gladstonian fervour, insisted that a vote on the Prague treaty was vital for EU stability and must be considered the same as a vote on Britain's continued membership. The Tories countered that a rejection would merely halt the establishment of a European super-state on the brink of becoming financially independent of the member-states. The bitterly fought referendum, held alongside a general election in May 2014, marked a decisive shift in Britain's relationship with ‘Europe’, especially given the scale of the resulting landslide…
Hugo Brady is a senior research fellow at the Centre for European Reform.
Britain's 'national government' of 2010 was not unprecedented. Britons had accepted patriotic coalitions before during the First Great Recession and Second World War. Still, David Cameron's Conservatives fought hard in the aftermath of that year’s general election to preserve a minority government propped up by an unlikely assortment of regional parties and independents. But industrial unrest and a stuttering economic recovery ate away at investor confidence in Britain’s public finances. With pressure on sterling mounting, Cameron was finally forced to invite Liberal leader, Nick Clegg, into a national coalition.
Buoyed by a huge increase in the Liberal vote, Clegg at first opted for opposition. He bet that a swift second election was likely and that the Liberal Democrats would again double their seats. But the threat of a new financial crisis later that year spelt an end to normal politics. And Cameron's offer to give Vince Cable – the Liberals' ever popular shadow chancellor – the role of deputy at the treasury to help fight Britain's "economic blitz" could not be refused.
Clegg himself took on the post of foreign secretary, setting the scene for the coalition's first crisis: Britain's European policy. Despite howls of protest from the Conservative grass roots, Cameron agreed to "put on hold" Tory demands for a membership renegotiation that would have withdrawn Britain from EU policies on social policy, human rights and justice and policing. Instead, Britain pursued its interests in Europe based on a joint strategy called 'Leading critically: A new pro-Europeanism', swiftly dubbed "Clameronism" by The Economist.
For a time, the odd fusion of Cameron's detached euroscepticism and Clegg's pro-European stance worked well. Though he had to cope with a handful of defections from his own party, Cameron no longer had to fret about how he might extract himself from his pre-election promises on the EU when they proved undeliverable. Nor did he have to endure the ignominy of blocking Croatia's EU accession with demands for special concessions for the UK. And Clegg's ability to woo the European Parliament – where the Alliance of European Liberals held the balance of power – proved critical in protecting Britain from overly onerous financial regulation and restrictive laws on working hours. The Conservatives, meanwhile, could afford occasional gestures to stubbornly high eurosceptic sentiment at home.
In 2012, a British-French initiative set up St-Malo II, an EU defence avant-garde needed to cope with plummeting defence budgets. Later, President Strauss-Kahn supported the European Commission's drive to complete a functioning EU services market by 2017 in return for basic rules on corporate taxation. Ever closer Anglo-French partnership contrasted sharply with what became known as Germany's 'strategic lethargy', where Berlin glumly viewed continued European integration as a negative but lacked the will to take alternative initiatives.
It was ironic, then, that events in Germany were to trigger the unravelling of the Tory-Liberal consensus and the end of what many considered to be their unholy alliance. In the so-called 'Four Professors' crisis of 2013, a brittle hodgepodge of bailout guarantees needed to keep Greece and other countries in the euro were struck down as unconstitutional by the Bundesverfassungsgericht on a third attempt by a group of German academic economists. A mushrooming series of financial and political crises finally forced EU leaders to confront the question of European Economic Union (EEU) at a hastily convened Inter-Governmental Conference in early 2014.
The so-called Treaty of Prague – which established a centrally managed eurozone treasury fund equal to 3 per cent of EU GDP – irrevocably split the coalition. A major change to the EU's treaties with implications for its budget, the treaty still required ratification in Britain. Cameron was unable to contain a backbench revolt in his own party over what were perceived as overly weak safeguards secured on Britain’s ‘red lines’ by the foreign secretary. For his part, Clegg insisted on a protocol which would leave open the option that Britain might one day join the euro.
Both parties had previously committed to holding a referendum on Britain's future in Europe and now that too became unavoidable. The Liberals, campaigning with Gladstonian fervour, insisted that a vote on the Prague treaty was vital for EU stability and must be considered the same as a vote on Britain's continued membership. The Tories countered that a rejection would merely halt the establishment of a European super-state on the brink of becoming financially independent of the member-states. The bitterly fought referendum, held alongside a general election in May 2014, marked a decisive shift in Britain's relationship with ‘Europe’, especially given the scale of the resulting landslide…
Hugo Brady is a senior research fellow at the Centre for European Reform.
Wednesday, April 14, 2010
Whatever happened to the G20?
By Katinka Barysch
George W Bush convened the first G20 summit in Washington in November 2008, at the height of the global financial and economic crisis. At two further summits in 2009, G20 leaders pledged to co-ordinate their economic stimulus packages (as well as exit strategies), avoid protectionism, address global imbalances, triple the resources of the IMF, and work out stricter rules for banks, hedge funds and other financial players.
The G20 was hailed as the body that would prevent the global economy from hurtling into another great depression. It would also allow the world's top economies, including for the first time the big emerging markets, to co-ordinate their policies in such a way as to make future crises less likely.
"Whatever happens, the G20 is already a winner", wrote Martin Wolf in the Financial Times at the time of the G20 Pittsburgh summit in September 2009. "The fact that it has become central to global policymaking may prove a more important legacy of this crisis than any specific agreements it reaches."
Less than 18 months after the initial Washington summit, however, the G20 has almost disappeared from public view. As growth has returned in most countries, the sense of urgency to 'fix' the world economy has started to fade. The new body's legitimacy is already being questioned. That is unfortunate because the G20 still has a daunting to-do list. The risk now is that the debate about what the G20 should do is superseded by one about what it should look like.
Critics are right that the G20 is unwieldy. Once the representatives from international organisations such as the IMF and the WTO, as well as regional groupings such as ASEAN, are added, the total number of leaders and top officials at G20 summits is closer to 30. The easiest way to cut the G20 down to size would be to reduce Europe's over-representation: France, Germany, Italy and the UK are members. Spain, which holds the rotating EU presidency, will once again attend the next G20 summit. So will the presidents of the European Commission, the European Council and the European Central Bank (and now Jean-Claude Juncker, who heads the eurogroup, wants to come, too). The fact that one third of G20 participants hail from Europe and only two from Africa reduces the legitimacy of this body in the eyes of many poorer countries.
The Europeans will one day have to streamline their representation. (Meanwhile, Pascal Lamy suggests how the Europeans can make less of a nuisance of themselves, see 'Too many Europeans in G20: If you must hog the seats, could you at least talk less?'.) Perhaps other emerging economies will be added instead. But this is not the time to open the Pandora's box of who should be allowed to attend G20 summits. If the group is to regain momentum and authority, it needs to first and foremost deliver on its promises.
On trade, G20 governments have not fully lived up to their pledge to refrain from protectionism. In the 12 months following the Washington summit, the countries represented there adopted 179 policies that harmed foreign trade, investment or workers, according to Global Trade Alert. The overall damage, however, has been limited and the pace with which G20 countries have imposed new tariffs and anti-dumping actions has slowed in the last six months. World leaders had also instructed their trade negotiators to finish the WTO's Doha round by the end of 2009. But multilateral trade talks remain stuck.
The G20's report card is similarly mixed when it comes to re-regulating financial markets. Despite the promise to work out new rules together, several G20 members have announced measures without consulting their partners, for example the US administration's Volcker rule or the EU’s alternative investment directive. Nevertheless, the newly established Financial Stability Board (consisting of G20 finance ministers, central bankers and regulators) has helped to forge a broad consensus on what needs to be done in terms of capital and liquidity ratios, bankers' pay and so on. At the next G20 summit in June in Toronto, governments are likely to back plans for a new levy on banks.
Least progress has been achieved on global imbalances. The G20 has been sidelined, while the real discussions about exchange rate policies and trade balances have taken place between Washington and Beijing. Whether the Americans manage to put global imbalances on the Toronto agenda despite Chinese opposition is a serious test for the new forum.
To achieve results, the G20 leaders need to do two things. First, they need to concentrate on unfinished business and resist the temptation, or the pressure, to take on new tasks. The G20 has rightly rejected suggestions that it should discuss geo-political issues, such as Iran's nuclear programme. It should avoid being saddled with global climate change discussions. South Korea's idea of adding development and poverty reduction to the agenda of the G20 summit in Seoul in November is harder to dismiss. Such a broadening of the agenda would keep emerging economies interested and show that the G20 agenda does not merely reflect rich countries' interests.
Second, for the G20 to make a difference, leaders need to focus on the urgent but unexciting task of integrating the G20 into the existing systems of global governance. The G20, like the G7/8 before it, is a process, not an organisation. It cannot take legally binding decisions. It does not have a permanent secretariat. But it does have a signalling function that can galvanise governments and other international organisations to act. It did so, for example, by adopting a strong stance on tax havens at the London summit in April 2009. In March 2010, Angel Gurria, secretary-general of the OECD, said (at the GMF Brussels Forum) that on taxation and transparency, there has been "more progress in the last 12 months than in the previous 12 years, because of a clear mandate from the G20". But not all institutional links function that smoothly. Officials in the UN and other venerable bodies resent that the G20 is hogging the limelight. Yet it is these bodies that will have to implement G20 decisions.
Katinka Barysch is deputy director of the Centre for European Reform.
George W Bush convened the first G20 summit in Washington in November 2008, at the height of the global financial and economic crisis. At two further summits in 2009, G20 leaders pledged to co-ordinate their economic stimulus packages (as well as exit strategies), avoid protectionism, address global imbalances, triple the resources of the IMF, and work out stricter rules for banks, hedge funds and other financial players.
The G20 was hailed as the body that would prevent the global economy from hurtling into another great depression. It would also allow the world's top economies, including for the first time the big emerging markets, to co-ordinate their policies in such a way as to make future crises less likely.
"Whatever happens, the G20 is already a winner", wrote Martin Wolf in the Financial Times at the time of the G20 Pittsburgh summit in September 2009. "The fact that it has become central to global policymaking may prove a more important legacy of this crisis than any specific agreements it reaches."
Less than 18 months after the initial Washington summit, however, the G20 has almost disappeared from public view. As growth has returned in most countries, the sense of urgency to 'fix' the world economy has started to fade. The new body's legitimacy is already being questioned. That is unfortunate because the G20 still has a daunting to-do list. The risk now is that the debate about what the G20 should do is superseded by one about what it should look like.
Critics are right that the G20 is unwieldy. Once the representatives from international organisations such as the IMF and the WTO, as well as regional groupings such as ASEAN, are added, the total number of leaders and top officials at G20 summits is closer to 30. The easiest way to cut the G20 down to size would be to reduce Europe's over-representation: France, Germany, Italy and the UK are members. Spain, which holds the rotating EU presidency, will once again attend the next G20 summit. So will the presidents of the European Commission, the European Council and the European Central Bank (and now Jean-Claude Juncker, who heads the eurogroup, wants to come, too). The fact that one third of G20 participants hail from Europe and only two from Africa reduces the legitimacy of this body in the eyes of many poorer countries.
The Europeans will one day have to streamline their representation. (Meanwhile, Pascal Lamy suggests how the Europeans can make less of a nuisance of themselves, see 'Too many Europeans in G20: If you must hog the seats, could you at least talk less?'.) Perhaps other emerging economies will be added instead. But this is not the time to open the Pandora's box of who should be allowed to attend G20 summits. If the group is to regain momentum and authority, it needs to first and foremost deliver on its promises.
On trade, G20 governments have not fully lived up to their pledge to refrain from protectionism. In the 12 months following the Washington summit, the countries represented there adopted 179 policies that harmed foreign trade, investment or workers, according to Global Trade Alert. The overall damage, however, has been limited and the pace with which G20 countries have imposed new tariffs and anti-dumping actions has slowed in the last six months. World leaders had also instructed their trade negotiators to finish the WTO's Doha round by the end of 2009. But multilateral trade talks remain stuck.
The G20's report card is similarly mixed when it comes to re-regulating financial markets. Despite the promise to work out new rules together, several G20 members have announced measures without consulting their partners, for example the US administration's Volcker rule or the EU’s alternative investment directive. Nevertheless, the newly established Financial Stability Board (consisting of G20 finance ministers, central bankers and regulators) has helped to forge a broad consensus on what needs to be done in terms of capital and liquidity ratios, bankers' pay and so on. At the next G20 summit in June in Toronto, governments are likely to back plans for a new levy on banks.
Least progress has been achieved on global imbalances. The G20 has been sidelined, while the real discussions about exchange rate policies and trade balances have taken place between Washington and Beijing. Whether the Americans manage to put global imbalances on the Toronto agenda despite Chinese opposition is a serious test for the new forum.
To achieve results, the G20 leaders need to do two things. First, they need to concentrate on unfinished business and resist the temptation, or the pressure, to take on new tasks. The G20 has rightly rejected suggestions that it should discuss geo-political issues, such as Iran's nuclear programme. It should avoid being saddled with global climate change discussions. South Korea's idea of adding development and poverty reduction to the agenda of the G20 summit in Seoul in November is harder to dismiss. Such a broadening of the agenda would keep emerging economies interested and show that the G20 agenda does not merely reflect rich countries' interests.
Second, for the G20 to make a difference, leaders need to focus on the urgent but unexciting task of integrating the G20 into the existing systems of global governance. The G20, like the G7/8 before it, is a process, not an organisation. It cannot take legally binding decisions. It does not have a permanent secretariat. But it does have a signalling function that can galvanise governments and other international organisations to act. It did so, for example, by adopting a strong stance on tax havens at the London summit in April 2009. In March 2010, Angel Gurria, secretary-general of the OECD, said (at the GMF Brussels Forum) that on taxation and transparency, there has been "more progress in the last 12 months than in the previous 12 years, because of a clear mandate from the G20". But not all institutional links function that smoothly. Officials in the UN and other venerable bodies resent that the G20 is hogging the limelight. Yet it is these bodies that will have to implement G20 decisions.
Katinka Barysch is deputy director of the Centre for European Reform.
Thursday, April 01, 2010
Turkey's turmoil
by Katinka Barysch
Political convulsions are nothing new in Turkey. But recent events have made some observers gloomy about the fate of the country and its suitability as an EU member. Tensions are escalating between the ruling AK party, on the one hand, and the army and the secular opposition, on the other. Some observers warn that another military coup cannot be ruled out completely. Others think that the highest court could launch a new case to ban the AKP. Political disputes, however heated, do not disqualify Turkey from EU accession. The danger is that the government and its opponents damage state institutions and undermine the rule of law by using the police, courts and other public bodies in their battle for political survival. This is where the EU must focus its efforts.
Dozens of former generals and other military personnel have been jailed in recent months, accused of plotting coups against the government of Recep Tayyip Erdogan. This followed hundreds of arrests under the ‘Ergenekon’ case against an alleged terrorist network of arch-secular judges, professors, soldiers and officials. More than 100,000 Turks have had their phones tapped, say media reports. Many ordinary Turks fear being caught up in the continuing investigations.
The opposition accuses Erdogan’s AK party of transforming Turkey into an Islamist state and of using the police and the judiciary to get rid of its opponents. They feel vindicated by the government’s hasty moves to amend the constitution in a way that would give the AKP more influence over the composition of the constitutional court and the ‘supreme board of judges and prosecutors’.
AKP leaders say that the constitutional amendments are needed to get the country closer to the EU. They point out that the legal package contains some bits that are needed to allow for the opening of new ‘chapters’ in the accession talks (like allowing civil servants to strike) and others that are long-standing EU demands (such as making it harder for the courts to close down parties). They say that recent waves of arrests are part of a much-needed process of democratisation at the end of which elected politicians – not generals, judges and other unaccountable figures – will have the last say in Turkish politics.
A complex mix of social change, internal power struggles and clashing ideologies is behind the current commotion. A changing Turkey needs a new system of political checks and balances. For too long, Turkey’s secular establishment has relied on the army, the constitutional court and the (traditionally secular) president to keep elected politicians in check. In each decade since Turkey became democratic in 1950, the army has forced an elected government from power. The constitutional court has banned scores of political parties suspected of undermining the secular order or the unity of the state. Much of the media and the education system used to spread Kemalist ideology. These are not the ingredients of a modern democracy.
Change was inevitable. And in a country with many fault lines and a fair number of fanatics, it was never going to be smooth. Nevertheless, the new system that now seems to be emerging is flawed. The president now hails from the AKP and is accused of using his wide-ranging powers of appointment to fill public bodies with party supporters. The armed forces no longer appear unified or strong enough to depose of the government (they last tried, and failed, in 2007). But they are still fighting to forestall what they regard as the AKP’s growing dominance. The judiciary appears torn in the clash between secularists and pious conservatives. The media is deeply polarised.
Perhaps most importantly, Turkey’s political parties do not present a proper choice to the Turkish people. The main opposition parties – the Kemalist CHP and the nationalist MHP – proffer little more than identity politics. Both lack a vision for a modern, dynamic Turkey at peace with itself and its neighbours. Their tired slogans and obstructionism have limited appeal. The rigid hierarchy within these organisations (“Shrinking cults for outsized egos” FT columnist David Gardner recently called them) make internal renewal improbable.
The AKP promised to be a political force of a different kind: a grass-roots movement, transparent (ak means white or pure in Turkish), representative of a more diverse nation, focused on policies rather than ideologies. But eight years after winning its first election, the AKP has started to resemble its political opponents. Erdogan, it is said, takes all important decisions. Corruption allegations have become more frequent – as have the party leadership’s attempts to use state power to deflect them. Media outlets that criticise the government have come under pressure. The AKP used to accuse the CHP of using the courts and the security apparatus to intimidate its opponents. Now such allegations are heaped onto the AKP itself. Public bodies, such as the higher education board, have become more, not less politicised under AKP influence.
There are some stirrings in Turkey’s political system, with old parties trying to regroup and new ones springing up. But lack of money and a prohibitive 10 per cent threshold to enter parliament make life very tough for smaller parties and newcomers. Although Erdogan promised years ago to reduce the 10 per cent threshold, such a change is conspicuously absent from the constitutional reform package that the AKP has now sent to parliament.
The new enlargement commissioner, Stefan Fule, has said that “the proposed reforms [in the constitutional package] go in the right direction”. But while broadly satisfied with the substance, Fule and his colleagues are unhappy about the process. They are right. Even if the AKP manages to push through its package (it will probably have to resort to a referendum since it lacks the necessary super-majority in parliament), it is questionable whether the current antagonistic climate is a good time for a very incomplete constitutional reform. The move smacks of political manoeuvring and could discredit the very process of constitutional renewal. Given that Turkey’s democracy badly needs better rules, rights and institutions, this would be a tragedy. The AKP should wait until after the 2011 parliamentary election and then start the broad constitutional debate, including opposition parties and civil society, that it has promised ever since 2007. The EU is right not to take sides in Turkey’s current political battles. But it should not be afraid to say loud and clear that a more thorough reform of the constitution and the law on political parties is necessary if such battles are not to undermine Turkey’s accession chances in the medium term.
Katinka Barysch is the deputy director at the Centre for European Reform
Political convulsions are nothing new in Turkey. But recent events have made some observers gloomy about the fate of the country and its suitability as an EU member. Tensions are escalating between the ruling AK party, on the one hand, and the army and the secular opposition, on the other. Some observers warn that another military coup cannot be ruled out completely. Others think that the highest court could launch a new case to ban the AKP. Political disputes, however heated, do not disqualify Turkey from EU accession. The danger is that the government and its opponents damage state institutions and undermine the rule of law by using the police, courts and other public bodies in their battle for political survival. This is where the EU must focus its efforts.
Dozens of former generals and other military personnel have been jailed in recent months, accused of plotting coups against the government of Recep Tayyip Erdogan. This followed hundreds of arrests under the ‘Ergenekon’ case against an alleged terrorist network of arch-secular judges, professors, soldiers and officials. More than 100,000 Turks have had their phones tapped, say media reports. Many ordinary Turks fear being caught up in the continuing investigations.
The opposition accuses Erdogan’s AK party of transforming Turkey into an Islamist state and of using the police and the judiciary to get rid of its opponents. They feel vindicated by the government’s hasty moves to amend the constitution in a way that would give the AKP more influence over the composition of the constitutional court and the ‘supreme board of judges and prosecutors’.
AKP leaders say that the constitutional amendments are needed to get the country closer to the EU. They point out that the legal package contains some bits that are needed to allow for the opening of new ‘chapters’ in the accession talks (like allowing civil servants to strike) and others that are long-standing EU demands (such as making it harder for the courts to close down parties). They say that recent waves of arrests are part of a much-needed process of democratisation at the end of which elected politicians – not generals, judges and other unaccountable figures – will have the last say in Turkish politics.
A complex mix of social change, internal power struggles and clashing ideologies is behind the current commotion. A changing Turkey needs a new system of political checks and balances. For too long, Turkey’s secular establishment has relied on the army, the constitutional court and the (traditionally secular) president to keep elected politicians in check. In each decade since Turkey became democratic in 1950, the army has forced an elected government from power. The constitutional court has banned scores of political parties suspected of undermining the secular order or the unity of the state. Much of the media and the education system used to spread Kemalist ideology. These are not the ingredients of a modern democracy.
Change was inevitable. And in a country with many fault lines and a fair number of fanatics, it was never going to be smooth. Nevertheless, the new system that now seems to be emerging is flawed. The president now hails from the AKP and is accused of using his wide-ranging powers of appointment to fill public bodies with party supporters. The armed forces no longer appear unified or strong enough to depose of the government (they last tried, and failed, in 2007). But they are still fighting to forestall what they regard as the AKP’s growing dominance. The judiciary appears torn in the clash between secularists and pious conservatives. The media is deeply polarised.
Perhaps most importantly, Turkey’s political parties do not present a proper choice to the Turkish people. The main opposition parties – the Kemalist CHP and the nationalist MHP – proffer little more than identity politics. Both lack a vision for a modern, dynamic Turkey at peace with itself and its neighbours. Their tired slogans and obstructionism have limited appeal. The rigid hierarchy within these organisations (“Shrinking cults for outsized egos” FT columnist David Gardner recently called them) make internal renewal improbable.
The AKP promised to be a political force of a different kind: a grass-roots movement, transparent (ak means white or pure in Turkish), representative of a more diverse nation, focused on policies rather than ideologies. But eight years after winning its first election, the AKP has started to resemble its political opponents. Erdogan, it is said, takes all important decisions. Corruption allegations have become more frequent – as have the party leadership’s attempts to use state power to deflect them. Media outlets that criticise the government have come under pressure. The AKP used to accuse the CHP of using the courts and the security apparatus to intimidate its opponents. Now such allegations are heaped onto the AKP itself. Public bodies, such as the higher education board, have become more, not less politicised under AKP influence.
There are some stirrings in Turkey’s political system, with old parties trying to regroup and new ones springing up. But lack of money and a prohibitive 10 per cent threshold to enter parliament make life very tough for smaller parties and newcomers. Although Erdogan promised years ago to reduce the 10 per cent threshold, such a change is conspicuously absent from the constitutional reform package that the AKP has now sent to parliament.
The new enlargement commissioner, Stefan Fule, has said that “the proposed reforms [in the constitutional package] go in the right direction”. But while broadly satisfied with the substance, Fule and his colleagues are unhappy about the process. They are right. Even if the AKP manages to push through its package (it will probably have to resort to a referendum since it lacks the necessary super-majority in parliament), it is questionable whether the current antagonistic climate is a good time for a very incomplete constitutional reform. The move smacks of political manoeuvring and could discredit the very process of constitutional renewal. Given that Turkey’s democracy badly needs better rules, rights and institutions, this would be a tragedy. The AKP should wait until after the 2011 parliamentary election and then start the broad constitutional debate, including opposition parties and civil society, that it has promised ever since 2007. The EU is right not to take sides in Turkey’s current political battles. But it should not be afraid to say loud and clear that a more thorough reform of the constitution and the law on political parties is necessary if such battles are not to undermine Turkey’s accession chances in the medium term.
Katinka Barysch is the deputy director at the Centre for European Reform
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