The disagreement between the two recently surfaced at the İstanbul Finance Summit (İFS) 2012. Speaking on the first day of the international meeting of economists on Monday, Babacan said calls for an accelerated economic growth — that Çağlayan has often made — cannot be heeded under the present circumstances. “A driver does not listen to those encouraging him to speed up on a foggy day,” he told the audience. Taking the podium at the summit the following day, Çağlayan, in return, said there was no need to worry “if the driver is a good one.”
The inter-ministerial dispute followed Çağlayan’s earlier criticism of Central Bank of Turkey Governor Erdem Başçı whose monetary policy, according to Çağlayan, remains too slow to start shoring up economic growth. The economy minister has gone public a number of times with his criticism of the central bank with regards to the interest rates the bank charges when providing liquidity to the market. Başçı’s team won the praise of most experts for choosing to remain cautious when it came to reducing those rates because there was still an inflationary risk for the national economy.
Turkey’s economic growth was between 8 and 9 percent for 2010 and 2011, but it slowed to some 3 percent in the first half of this year, leading most observers to conclude that the government will not be able to meet its 4 percent year-end target. Babacan has already acknowledged that the growth rate will be recorded below the targeted level but also underlined that what matters is the country’s long-term growth performance. Çağlayan, on the other hand, is known in economic circles for placing too much emphasis on boosting exports at the expense of price stability, ensuring which is the central bank’s primary task.
The first time Babacan and Çağlayan publicly spoke out against each other was at the beginning of this year when the deputy prime minister criticized what he termed as the sluggish increase in exports despite a notably weaker national currency in 2011.
(Today’s Zaman)
