Turkey’s Economy Chief Weakened After Government Reshuffle

  • Simsek no longer controls capital markets, banking regulators
  • Investors had welcomed Simsek’s survival as deputy premier

Turkey’s Deputy Prime Minister Mehmet Simsek lost some of the economic portfolio’s main oversight roles in the first sign of his diminished powers under a new premier loyal to President Recep Tayyip Erdogan.

Responsibility for capital markets and banking regulators, as well as the Savings Deposit Insurance Fund, was taken away from the former Merrill Lynch strategist at the first meeting of the new cabinet and given to Nurettin Canikli, another deputy prime minister. Supervision of Turkey’s Eximbank was transferred to Economy Minister Nihat Zeybekci.

Simsek is the last survivor from a team of officials credited with orchestrating Turkey’s rapid growth years. His re-appointment in a cabinet reshuffle that cemented Erdogan’s grip on power was cheered by investors, spurring the biggest rally in Turkish stocks this year on Tuesday and boosting the lira.

Yet his diminished authority will fuel investor concerns that economic policy is changing under Erdogan and his allies, who share an unorthodox view that Turkey needs lower borrowing costs to curb inflation. While Simsek retained oversight of the Treasury and central bank, losing the banking regulator from his portfolio may be bad news for the nation’s commercial lenders, according to Finansbank AS chief economist Inan Demir.

“Even if Simsek had kept his former powers, his room for action was already going to be limited to a large degree,” Demir said by e-mail from Istanbul. “The fact that some of his authorities were taken away is a sign that his positive influence shouldn’t be exaggerated.”

The lira weakened 0.1 percent to 2.9392 per dollar at 11:16 a.m. in Istanbul, one of only two emerging market currencies trading lower against the greenback on Thursday among the 24 tracked by Bloomberg.

Binali Yildirim took office this week as premier and ruling party boss after his predecessor, Ahmet Davutoglu, resigned following a power struggle with Erdogan. The president is seeking to transform what has traditionally been a largely ceremonial role into the center of power in Turkey.

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