At the end of a long day, as the Turkish lira had plunged to another record low against the euro and the US dollar, the Turkish president announced a spate of measures to prop up the lira and guaranteed that the government would cover losses by lira deposit holders in cases where the lira's depreciation against foreign currencies exceeds banks' interest rates.
On Tuesday, the lira managed to rebound against foreign currencies and regained its losses of the last month. Erdogan supporters started celebrating the return of the lira on Twitter with the hashtag #HeWasRightAgain.
The president appears to have saved the day, but can he really save the country and his future in politics through his new deposit scheme? I very much doubt it.
Ordinary households will miss out
First, in this model, there is no justice. It is the treasury that will compensate for possible losses of depositors in lira. That means households who do not have any savings in the banks will have to share the burden of a further depreciation of the lira.
And what about those people who sold their dollars early enough, to buy dollars at a much lower rate the next day and made enormous gains — there's speculation that some investors close to the government received hints prior to Erdogan's announcement.
Second, it is not a sustainable model. In case of a further depreciation, the new scheme could raise public debt to record levels and drive up inflation even further.
According to the state-owned Turkish Statistical Institute, inflation was hovering just above 21% last month. Independent researchers put it at 60%.
The 'Turkish Dollar Scheme'
Third, this move prioritizes the US dollar over the lira. Prior to the announcement of the new deposit scheme, 64% of bank deposits were in a foreign currency. We do not know how much of these deposits was transferred into lira. Not that it matters, if your lira are essentially being treated as if they were US dollars. Some observers have already coined it the "Turkish Dollar scheme" on social media.
Critics also argue that Erdogan's move is essentially a "hidden" interest rate hike, a measure he had refused to entertain — arguing that Islam demands lower rates — despite warnings that sticking to interest rate cuts to control inflation would backfire.
Nobody, except his loyal voters, trusts him anymore. Investors may be cautiously optimistic about the financial impact, however they know very well that he is stubborn, illogical and also unpredictable.
Erdogan for president again?
We know that Erdogan sees himself as the master in all walks of life. These days he's an economist who wants to control the economy and will stop at nothing to reach his short-term political goals.
He is fixated on securing a third presidential term in the 2023 election that coincides with the 100th anniversary of the Turkish Republic. His campaign will focus on driving home the message to voters that he has preserved the country from foreign interference that would ruin Turkey financially.
He will point to the increase in exports, positive GDP growth, and the success of his megaprojects. However, people, who have become poorer in recent years through his economic incompetence will never forgive him.
Pulling a rabbit out of the hat may have saved the day, but whether that will be enough to secure another presidential term is another matter.
Banu Güven is a Turkish journalist and television presenter. She writes for various German and Turkish media outlets. She has been living and working in Germany since 2018.
Edited by: Rob Mudge