The price of gasoline in Turkey is now more than 1.50 euros a liter. The protests against the increase can be heard during rush hour at 8 a.m. Drivers honk their horns simultaneously for one minute at this time to register their displeasure at rising prices. (Those who hate the noise flash their hazard lights in their own protests.) Fuel prices have gone up 18 percent since the beginning of the year, when the official inflation target was noted as 10 percent. (It’s 4 percent for 2007.) The protesting drivers know that besides gasoline, the prices of all other imported goods have also gone up spectacularly. At the same time, the Turkish economy seems to be reaping no benefits from either rising exports or tourism. In the tourist resorts, the hotels are mostly empty because the bird flu scare took its toll on contracts early this year, when they were due to be signed. Then fear of terrorist attacks made the situation worse. Meanwhile, the luncheon to which the furious holders of Turkish bonds were invited by investment bank Morgan Stanley at New York’s Mandarin Hotel on June 26 was also a noisy event. Turkey’s central bank governor, Durmus Yilmaz, made it clear that he would put up a fight to stem the attack against his country’s currency, the lira, with all means available. The intervention rate had risen to 27 percent so that liquidity would be drawn to the lira away from the hard currencies. The central bank was also selling US dollars from its reserves in auctions. Yilmaz’s rhetorical skills were not appreciated by the investors attending the event or the rating agency Standard & Poor’s, which downgraded the Turkish economy the next day. Turkish government bond rates were raised from 14 percent to 22 percent. This reduced the value of the older bonds which had been issued at lower rates. Those investors who had bought the myth of «the strong Turkish economy» and held on to their bonds had seen the lira lose 20 percent of its value in recent weeks. In February, foreign investors held Turkish government bonds worth 23 billion. This had dropped to 15 billion by the end of May. But the rising interest rates are certain to fuel inflation and public discontent in the coming months, while also slowing down economic activity. Naturally, problems are more acute among the lower income strata, including the 1.5 million public servants (excluding military personnel). According to recent data, the wives of 46 percent of male public servants who are married do not work; 87 percent of public servants earn salaries of up to 600 euros. The challenges To be sure, the economic crisis is not the real problem in Turkey, though poor finances exacerbate the country’s problems. Prime Minister Recep Tayyip Erdogan has bigger worries. The economic crisis was ignited by political clashes such as the election of the president of the republic, who, according to the opposition, cannot be married to a woman who wears a headscarf. There are also problems in the procedure for Turkey’s entry into the European Union, mainly posed by the refusal to recognize Cyprus. There is also tension arising from the handling of the Kurdish issue and the rekindling of armed clashes in the southeast. When EU officials raised the first objections to the attempt to avoid recognition of Cyprus, Erdogan and his foreign minister, Abdullah Gul, hastened to adopt a defiant stance: «Turkey is not the country that will accept pressures.» They added that they intended to withdraw from the ongoing negotiations if necessary. When such a possibility became more visible, Erdogan, in an interview with Spanish newspaper El Pais, said that the negotiations are a process to last 10 years and Turkey intends to adapt itself to its requirements. Fuzzy language The Turkish premier is equally contradictory on domestic issues. On the hot issue of the election of the president of the republic, for instance, opinion polls favor the incumbent, Ahmet Necdet Sezer, although he cannot be re-elected. Erdogan himself is the second most favored for the post. When asked about his intentions, considering he has the parliamentary majority to be elected if he wishes, he responds enigmatically by saying the post can go to someone else. Erdogan is not ruling himself out and he is keeping all his options open. Still, he continues to speak broadly about the post. He says the new president must be «someone who will embrace everyone» and who will decide on his candidacy after consulting with organizations «directly related with the people.» He is clearer on the Kurdish problem. In the past, he boldly accepted that such a problem existed. His admission probably earned him votes but also the wrath of nationalist circles, who prefer to ignore reality. The same circles often attack him because some of his advisers are of Kurdish origin. In a recent discussion with reporters, Erdogan told Kurdish political leaders to do three things: sever all ties with the outlawed Kurdish Workers’ Party (PKK), join the political dialogue in Parliament, and respect state symbols such as the flag and the national anthem. Erdogan appears to believe that the real problem with Europe does not lie in his country’s relations with other European governments but in European public opinion. «We must reach out to the people,» he told reporters privately. However, improving Turkey’s prospects by changing policy does not appear to be on this Turkish government’s agenda.