Middle EastTurkey

In Germany, Erdogan courts a vote of confidence

Turkey's leader is in Germany trying to lure investors and assure others that his country is open for business despite an economic crisis

September 29, 2018 12:22 PM (UTC+8)
German President Frank-Walter Steinmeier (L) and Turkish President Recep Tayyip Erdogan at a state dinner at Bellevue presidential palace in Berlin on September 28, 2018. Photo: AFP/Adam Berry

Turkish President Recep Tayyip Erdogan is in Berlin for a high-stakes three-day visit aimed at securing a gesture of confidence from Germany amid an economic crisis at home.

Analysts say Germany is neither willing nor capable of offering Turkey a financial bailout, but Berlin can pledge direct investment and give the Turkish leader a needed image boost at a time of strained diplomatic relations with the United States.

The German and Turkish economies are “intertwined,” said Cesurhan Taş, vice-president of the Ankara-based Sahipkiran Centre for Strategic Research.

“There are over 6,500 German companies operating in Turkey,” he said. “Turkey will demand (financial) support from Germany” in the form of direct or indirect investments, Taş said.

“The Turks have been saying they don’t seek any direct economic handout or support from Germany, so no direct budget support because Germany doesn’t have tools for that and the money they could offer wouldn’t be enough and not politically feasible,” said Kristian Brakel of the Heinrich Böll Foundation in Turkey.

Raising investor confidence

Erdogan has rejected the idea of an IMF loan, and the EU does not have a mechanism – or the political capital – for a bailout of non-members.

What the Turks are seeking, he said, is Germany’s help in raising investor confidence and stemming the trend of German investors pulling their money out of Turkey – and of Turkish investors moving to Germany.

On his trip Erdogan may seek more support to upgrade a customs union with the European Union and for controls to be loosened on credit lines from the European Investment Bank to projects related to his ruling AK party, the analyst said.

That decision would not be up to Germany alone, as it relates to multiple EU governments who’ve had their citizens arrested by Turkey as dual nationals, but Berlin could be an ally for Turkey in that respect.

“Turkey is not Germany’s most important trading partner … but quite a lot of German companies have production chains in Turkey,” he said.

A Turkish economic collapse, which Brakel does not foresee, would have a limited impact. But the importance of the Turkish economy goes beyond economic relations.

“The question many in the German government are having, is if the economy fails, what’s going to happen to Turkey? Likely the Turkish government will use measures to assure control – that will probably mean more nationalism, closing to other countries. That’s not in Germany’s interest,” he said.

Berlin, Brakel said, wants to ensure continued cooperation between intelligence agencies, as well as cooperation on refugees.

“If German politicians came out and said we want to support Turkey to get through this economic crisis, that would be a win, even if there’s no substance behind it,” said Brakel.

Revamping the railways

On his first day in Berlin, Erdogan held meetings with both Turkish and German businessmen.

“He was trying to lure or to attract more German direct investors to bring in capital and technology,” said Rainer Hermann, the Middle East editor of Germany’s Frankfurter Allgemeine Zeitunga newspaper.

The biggest economic project in the works is a revamp of the Turkish railways.

“The German company Siemens is going to have the contract for a modernization and extension of the Turkish railways with a volume of US$35 billion,” said Hermann.

The project was outlined as part of Turkey’s bid to host the European football championship in 2024, the idea being that nine cities would be connected by a modern rail system.

Berlin on Thursday beat out Ankara on the bid, but the blueprint offers an idea of what Turkey is seeking to connect its far flung cities and continue its modernization efforts.

“China is also interested, but Erdogan is willing to give it to a German company as a sign that Germany is welcome again,” said Hermann.

As for the Turkish side, “Erdogan wants to have a gesture from Germany, that we are standing at the sides of our Turkish partners. It will signal to the markets that Turkey is not alone and signal to the US that bridges to Washington are burned, but we can rely on our European and especially our German friends.

“This is rather symbolic, but I think Turkey could not expect more,” he said.

Rule of law

The biggest obstacle in attracting investment is the increasingly authoritarian leadership, most recently with Erdogan both nominating and ratifying himself as head of the country’s sovereign wealth fund, for which his son-in-law is the deputy.

“The burden of the Turkish side is to show there is rule of law, that we do not interfere, you can transfer profits. This is what foreign investors expect from Turkey,” said Hermann.

“Turkey needs these kind of investors to bring in capital and technology in order to regain the steam the Turkish economy had when it was really growing phenomenally,” he said.

Behind closed doors, the state visit is likely to involve hard talk.

“The German politicians are going to tell Erdogan in closed circles that the economic crisis is not a conspiracy but a direct outcome of the presidential system and a lack of institutional control mechanisms.”

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