Turkey's market turmoil is not economic, it is executive dysfunction, Yalcin Karatepe, a deputy chair of the country’s main opposition Republican People’s Party (CHP), wrote on April 2 in an op-ed for the The Nikkei.

Policy coherence has been structurally decoupled from institutional legitimacy, Karatepe, who serves as shadow economy minister, also noted.

Op-ed offensive

Since the detention of Ekrem Imamoglu, Istanbul’s mayor and main political rival to Turkish President Recep Tayyip Erdogan, the Turkish opposition’s op-ed activity has seen an unprecedented boom. You can see reports on the efforts of other opposition op-ed writers, including Imamoglu’s piece for The New York Times, among bne IntelliNews’ recent Turkey stories here.

Publishing op-eds in foreign media is a new thing for the CHP, known for its faint-heartedness (particularly when it comes to foreign policy).

Mulkiye launched in 1859

Karatepe is a veteran professor at the Ankara University Faculty of Political Science. Known as Mulkiye, it was founded in 1859 to bring through public servants for the Ottoman State.

He might be advised to avoid long sentences in his upcoming pieces for the media, given that it is the age of “140-character” social media posts, with no-one seemingly having time to bury their head in lengthy texts. But here we go.

Governance dysfunction

In contemporary Turkey, the erosion of institutional predictability has rendered conventional economic analysis obsolete, Karatepe says, setting out his stall.

The detention of Imamoglu was not a discrete judicial episode, according to the shadow minister.

“[The detention of Imamoglu] was the public exposure of a deeper governance dysfunction, one that markets have already begun to price in as a permanent feature,” he adds.

The sharp depreciation of the Turkish lira, the widening of credit default swap (CDS) spreads and the cascading exit from lira-denominated assets, he says, are not anomalies but indicators of a regime-linked systemic repricing.

Central bank, a defensive apparatus of the regime

The $30bn depletion in Turkey’s gross reserves within a few days of the Imamoglu detention did not bolster confidence but signalled a liquidity haemorrhage from an institution no longer perceived as autonomous, Karatepe observes.

The central bank, he says, has ceased to function as a monetary anchor. It now acts as a defensive apparatus for regime stabilisation, utilising opaque foreign exchange interventions to delay, not deter, market deterioration.

Asset managers recalibrating portfolios

Asset managers are not misreading these developments. They are recalibrating portfolios around a foundational shift, continues Karatepe.

Turkey's policy instruments, including interest rates, reserve buffers and regulatory mechanisms, no longer operate within a rules-based framework. They have been subordinated to a governance architecture defined by political improvisation and legal ambiguity, he says.

This is not a volatility that can be hedged with risk premiums. It is a system where policy coherence has been structurally decoupled from institutional legitimacy, he surmises.

Off-the-record briefings

“Finance minister Mehmet Simsek's recent engagements with institutional investors only underscore this disconnect. In off-the-record briefings, Simsek reportedly downplayed ongoing democratic protests, suggesting they would ‘dissipate’ within days,” writes Karatepe.

“This was not a communication strategy but an attempt to frame a deepening governance crisis as a temporal disruption. Such positioning is not only analytically defective, it also is economically dangerous.”

Does capital respond to PR spin?

“Capital does not respond to PR spin; it responds to credible institutional scaffolding,” according to Karatepe.

Turkey's disinflation narrative no longer commands credibility, he says, adding: “The modest deceleration in headline figures is not a reflection of underlying price stabilization. It is a statistical artifact that is engineered through deferred adjustments in administered prices and the opportunistic exploitation of base effects.”

The informal labour market is expanding as a de facto policy tool, suggests Karatepe. “Private investment is structurally down due to the erosion of legal predictability and the disintegration of regulatory architecture.”

Institutionally bankrupt

Monetary transmission has ceased to function, warns Karatepe, saying: “What remains is a sterile framework. It is technocratic on the surface but institutionally bankrupt at the core.”

Turkey's economic disintegration cannot be understood through balance sheet diagnostics or fiscal ratios, says Karatepe. “The issue is not inflation targeting or current account deficits. It is the destruction of the public architecture that makes coordinated policy possible in the first place.”

Systemic collapse

“This is not a case of technical misalignment or policy fine-tuning gone awry. It is the culmination of a systemic collapse. Economic governance has been hollowed out,” adds Karatepe.

“The outer shell of macroeconomic management remains in place in the form of policy rate hikes, ad hoc liquidity operations and circuit breakers. These measures no longer operate within a coherent framework.”

Managing appearances

“What markets are reacting to is not noise, it is the entropy of a state whose institutions no longer produce stability but only manage appearances,” advises Karatepe.

Attempting to isolate economics from politics under these conditions is analytically vacuous, he says. “The absence of rule-bound governance does not just deter capital. It forecloses the possibility of sustainable growth altogether.”

Following the detention of Imamoglu, what has come into full view, in Karatepe’s eyes, is not a temporary rupture, but the logical culmination of an economic regime built on deliberate institutional dismantling.

“This is not dysfunction by accident, it is the systemic substitution of legal autonomy with political obedience, and of developmental planning with executive improvisation.

“What persists is a pantomime of governance: a macro financial apparatus that mimics function while producing disorder. Monetary policy has devolved into ad hoc liquidity suppression, fiscal architecture is subordinated to political choreography, and industrial strategy is a void. In this vacuum, it is not capital that absorbs the volatility; it is society through suppressed wages, hyper-fragmented labor markets, and the slow attrition of Turkey's productive base.”

Let’s hike the policy rate

In his conclusions, Karatepe cautions: “This crisis is not cyclical. It is constitutional. It cannot be resolved by recalibrating interest rates or convening investor roadshows.

“The state must be fundamentally reconstituted. That means a return to institutional symmetry where fiscal, monetary, and regulatory authority function independently, transparently and with democratic legitimacy.

“It means abandoning the illusion that technocratic cosmetics can substitute for institutional function. No foreign capital injection, no monetary sterilization and no reserve drawdown can reverse the collapse of a state that has forfeited its social mandate.”

“This is not a crisis response. It is systemic sabotage masquerading as policy. The Turkish economy has not lost control of its instruments. It has been stripped of the institutional scaffolding that makes those instruments operable.

“Interest rates may rise. Reserves may burn. Statements may be issued. When governance operates as improvisation and law is a movable boundary, no policy tool retains traction.”

Performance art for bond markets

“What persists is not policy,” says Karatepe. “It is performance art for bond markets, draped in acronyms and stripped of purpose.

“This is not the absence of coordination. It is the institutionalization of noise. A state that no longer plans and no longer governs. It arbitrages chaos.

“Unless constitutional order, institutional autonomy and production-led coordination are restored, there will be no recovery, only the perpetual recycling of breakdown.”