August 29, 2018
Germany considers financial assistance to Turkey
We argued before that the refugee deal between the EU and Turkey was a pact with the devil - or rather more concretely a decision that solved a short-term problem with very high long-term costs. These costs are already becoming real. The Wall Street Journal has a story this morning that the German government is now seriously considering to provide emergency financial assistance to Turkey, fearing that an economic crisis might endanger Turkey’s willingness and ability to adhere to its side of the refugee bargain. The article said the talks were at an early stage. Under discussion are a co-ordinated bilateral EU bailout, similar to the first Greek bailout. The article quotes a German official as saying that the German government would go a long way to stabilise Turkey because it has no political alternative. Discussions have taken place between Olaf Scholz and his Turkish counterpart, Berat Albayrak. President Recep Tayyip Erdogan is due for a visit to Berlin on September 28.
The Germans are furious with Donald Trump’s decision to impose sanctions on Turkey, which one official called an insane and ill-informed policy. One of the issues on which the EU has come to an internal agreement is whether to make a bilateral financial package contingent on IMF involvement - the same issue as during the eurozone crisis. Turkey has so far resisted this option. The Germans are so desperate that they are even considering direct bilateral aid in the form of untied financial credits, an instrument last used to help Hungary in the 1980s. But, given the size of the Turkish economy, we think this is not a very probable route. The article quotes an opinion poll in Germany according to which 72% are opposed to financial aid to Turkey. The thinking of the German government is reflected by an unnamed official who is quoted as saying:
"We cannot just sit and watch Turkey go down the drain. The migration pressure and the geostrategic importance, as well as the economic links, are too important."
If Germany goes ahead with this, we think the AfD will be the biggest political beneficiary. Aid to Turkey - along with police inaction during violent demonstrations - are ideal subjects for the AfD to portray itself as the voice of the people versus the establishment.