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Turkeys lira fluctuated between gains and losses as Recep Tayyip Erdogan took his oath as an executive president with vastly expanded powers and before he announces his cabinet.

The currency reversed earlier gains of as much as 1.3 percent against the dollar to drop 0.9 percent after Turkey announced changes in central bank law. An official decree removed Article 25 of the nations central bank law that says governors are appointed for a five-year term with a cabinet decision and may be reappointed after their term expires. It didnt set an alternative term.

President Erdogan was sworn in Monday afternoon and will unveil his cabinet around 9:30 p.m. in Istanbul. He will appoint members of his cabinet, which is expected be reduced to about 16 in strength from the current 27, and also has the power to appoint other high-level officials.

While the new system boosts the presidents powers and cuts those of the parliament, investors are on the lookout for cabinet members names that may provide clues on any future policy bias. They are waiting to see whether those with a pro-market image such as Deputy Prime Minister Mehmet Simsek and Finance Minister Naci Agbal made the cut, or if theyll be replaced by people from Erdogans inner circle who prize growth over fiscal and monetary discipline.

With above 15 percent annual inflation and $230 billion-plus external financing needs versus $26 billion net foreign-currency reserves, the economy should need urgent measures to cope with the macro imbalances, Global Securities analysts including Sertan Kargin wrote in a note on Monday. Turkeys case is no longer really about who will be in the driving seat of the economy, but whether or not challenging macro measures will be taken.

Erdogan had said he intended to take more control of monetary policy once elected as an executive president. He has also pledged to lower interest rates, putting pressure on the countrys markets ahead of the June 24 vote. His senior advisor Cemil Ertem said in late June that the names of policy makers or cabinet ministers are meaningless under the new system.

For as bad as it sounds, I must agree with Ertem, said Cristian Maggio, head of emerging market strategy at TD Securities in London. I think its all about whats in Erdogans mind. That said, the usual names that are market-friendly would make the cabinet more palatable.

The lira was 0.2 percent weaker at 4.5822 per dollar as of 5:33 p.m. in Istanbul as the changes in central bank law spooked investors ahead of the cabinet announcement. The decree also removed a clause that said central bank deputy governors are appointed for a five-year period through joint decision and with recommendation of the governor.

The Borsa Istanbul 100 Index, benchmark gauge of Turkish equities, was 0.4 percent higher, after paring earlier gains of as much as 2.1 percent. The yield on 10-year government bonds dropped 36 basis points to 17.07 percent.

With assistance by Selcan Hacaoglu

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Turkish Assets Fluctuate Ahead of Erdogan's Cabinet ...

ISTANBUL (Reuters) - Turkeys Tayyip Erdogan ushered in the new, executive presidential system he had long campaigned for by putting his son-in-law in charge of the economy and promising a greater overhaul of a country he has dominated for 15 years.

Hours after he was sworn in with sweeping new powers at a ceremony in the capital of Ankara late on Monday, Erdogan named Berat Albayrak as treasury and finance minister. Albayrak, 40, previously served as energy minister and, before that, led a company seen as close to the government.

His appointment - and the absence of familiar, market-friendly ministers from the cabinet - has helped send the lira sharply lower. Erdogan has said the powerful executive presidency is vital to drive economic growth and to ensure security after a failed 2016 military coup.

Western allies and rights group decry what they say is increasing authoritarianism and a push toward one-man rule. Investors have been worried by what they fear is Erdogans tightening grip on monetary policy.

Albayrak becoming the finance minister is not a good sign especially because of his close relationship with President Erdogan. It is a sign that Erdogan will control economic policy even more, said Guillaume Tresca, a senior emerging markets strategist at Credit Agricole.

The independence of the central bank could be undermined.

A self-described enemy of interest rates, Erdogan wants to see lower borrowing costs to spur growth. Investors, who have warned that the credit-fueled economy is overheating, want to see decisive interest rate increases to tame double-digit inflation.

Speaking during a handover ceremony in Ankara, Albayrak pledged to work hard to bring inflation down to single digits and also to ensure a sustainable and healthy growth.

We are facing a period where we have to work hard to bring inflation down to single digits again, Albayrak said adding that Turkey will have a stronger monetary policy in the upcoming period.

Under the new system, the post of prime minister has been scrapped and the president selects his own cabinet, regulates ministries and can remove civil servants - all without parliamentary approval.

Likewise, the departure of market-friendly ministers such as Mehmet Simsek, the well regarded former deputy prime minister, and Naci Agbal, previously the finance minister, has also undermined confidence.

Nothing can be regarded as positive on this one, said Edwin Gutierrez, the head of emerging markets sovereign debt at Aberdeen Standard Investments. Obviously it is going to be a step down in capacity compared to Simsek.

Erdogan, the most popular and divisive leader in recent Turkish history, has now formally become the most powerful leader since Mustafa Kemal Ataturk founded the republic from the ruins of the Ottoman Empire.

Just as Ataturk transformed an impoverished nation at the eastern edge of Europe into a secular, Western-facing republic, Erdogan has fought to bring Islamic values back into public life and lift millions of pious Turks - long ostracized by the secular elite - out of poverty.

We are leaving behind the system that has in the past cost our country a heavy price in political and economic chaos, Erdogan said in an address late on Monday.

In the aftermath of the 2016 coup, Turkey, a member of the NATO military alliance and still nominally a candidate to join the European Union, has detained some 160,000 people, jailed journalists and shut down dozens of media outlets.

The government says its measures are necessary given the security situation.

In one of three presidential decrees issued in the governments Official Gazette on Tuesday, it was announced that the president would appoint the central bank governor, deputies and monetary policy committee members for a 4-year period.

It was also announced in the Official Gazette that Erdogan had appointed ground forces commander General Yasar Guler as the new chief of the general staff, replacing General Hulusi Akar, who was appointed defense minister in the new government.

Additional reporting by Ezgi Erkoyun in Istanbul and Marc Jones in London, Editing by Darren Schuettler, William Maclean

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Erdogan starts presidential rule, names son-in-law Turkish ...

Turkeys President Recep Tayyip Erdogan moved to cement his control over the economy, claiming the exclusive power to appoint central bank rate-setters a day after naming his son-in-law to oversee economic policy.

The moves complete a years-long process that saw members of his investor-friendly A-team removed from the government one-by-one, increasingly rattling markets. The lira plunged on Monday by the most since a failed coup attempt two years ago and is down by 19 percent against the dollar so far this year.

Id have expected Erdogan to have learned the bitter cost of messing with markets, Atilla Yesilada, economist at GlobalSource Partners in Istanbul, said in an emailed report. Apparently, he does think that with his new powers he can best the markets.

Erdogan was sworn in Monday for a five-year term as president with enhanced powers after winning re-election under an amended constitution, setting the stage for him to follow through on a pre-vote promise to take more direct control over monetary policy. The 64-year-old leader has repeatedly clashed with the central bank over borrowing costs that he is determined to keep low under almost all circumstances.

He formalized his increased powers over top appointments at the bank with a decree on Tuesday. Turkeys largest business association, Tusiad, which has been urging the government to respect the rule of law and independence of institutions, cautioned that central bank autonomy is very important for a strong Turkish economy.

It isnt clear how the central bank will respond to price gains running more than triple the official target at its next monetary policy meeting on July 24.

Key is independence from influence and ability to do what is needed. Given the tough decisions needed to be taken, with the new cabinet and changes with decrees, that ability may have been impaired, especially on increasing interest rates to control inflation, according to Michel Danechi, a portfolio manager at Vedra Partners Limited in London.

The decree, one of the first three after Turkey officially shifted its governance system to an executive presidency, was published in the Official Gazette. It didnt include any reference to other members of the cabinet in appointing the central bank chief, who used to be named jointly by the president, prime minister and a deputy prime minister in a decree signed off by the entire cabinet.

The order followed his appointment of Berat Albayrak, a son-in-law and former energy minister who entered parliament for the first time in 2015, to run a new ministry of treasury and finance, combining what used to be the two most powerful economic jobs. Hell replace Mehmet Simsek, a former Merrill Lynch executive and the last man standing from a group of politicians whove been trusted by investors over the years to rein in the presidents go-for-growth instincts and keep Turkeys $880 billion economy on a sustainable path.

There was no job for Simsek in the downsized cabinet of 16 ministries.

From now on, budget and fiscal discipline will be maintained in a better way, Albayrak said as he took office on Tuesday.

Read: Turkey Strips Government of Role in Naming Central Bank Chief

The lira erased its earlier gains after the report and was trading 0.9 percent higher at 4.6910 per dollar at 4:33 p.m. in Istanbul. The currency depreciated more than 3 percent after Albayraks appointment on Monday.

The currencys slide is not good news for Turkeys indebted corporations, which have borrowed heavily in hard currency and now face ballooning foreign-exchange liabilities. The difference between the corporate sectors foreign liabilities and assets is at near record $221 billion as of end April.

For more on the cabinet, read: Erdogan Stokes Investor Unease With Son-in-Law as Economy Czar

Erdogan named Fuat Oktay, formerly a senior official at the prime ministers office, as his vice president and kept Mevlut Cavusoglu in place as foreign minister. Hulusi Akar, the chief of staff who was held hostage during the night of the coup attempt against Erdogan, was named as defense minister. Mustafa Varank, an Erdogan aide, will be in charge of industry and technology.

During the snap election campaign, Erdogan told Turks that the new presidential system would ensure stability in turbulent times at home and abroad.

After the unsuccessful putsch, authorities began a sweeping purge of the civil service, judiciary, security forces and education system, arguing that supporters of the coup attempt were being rooted out. Thousands more officials were fired from government jobs on Sunday, bringing the total to about 130,000. Turkey has also become more deeply embroiled in the civil war in neighboring Syria, as Erdogan sent his army into the countrys northwest to fight Kurdish militants.

With assistance by Constantine Courcoulas, Tugce Ozsoy, and Asli Kandemir

(Updates with remarks from finance and treasury minister in 11th paragraph.)

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Erdogan Expands Clout Over Central Bank, as He Promised

ISTANBUL Turkish President Recep Tayyip Erdogan was sworn in Monday under a new governing system that grants him sweeping executive powers, which critics say give him far too much control.

A former Istanbul mayor, Erdogan has been at the helm of Turkey since 2003 as prime minister and then the first directly elected president since 2014.

Speaking at his sprawling presidential compound in Ankara, Erdogan unveiled the rebranded presidency "on this most important day of our country."

He won last month's election with 52.9 percent of the vote, ushered in the executive presidency that ends parliamentary governance and boosts the powers of the formerly ceremonial presidency.

Erdogan said the executive presidency would put behind a "system that heavily cost our country through political, social and economic chaos."

He argued that the new structure would bring stability and efficiency and said, "is not forced but rather a sagacious choice that history has led us to." Turkey narrowly approved the executive presidency in a contentious referendum last year.

Abolishing the post of prime minister, the president will now form the government, appoint ministers, vice presidents and high-level bureaucrats, issue decrees, prepare the budget and has the power to impose a state of emergency. Parliament can ratify or reject his budget and the president needs parliamentary approval for emergency rule and decrees passed during that time.

Under the new system, Erdogan will not only run the executive branch but also lead his Justice and Development Party in parliament where he is six short of a majority and therefore allied with a nationalist party. Critics say the new system undermines impartiality and could lead to one-man rule with limited checks and balances.

Crowds cheered Erdogan along his convoy's route as he made his way to the inauguration ceremony. The presidency tweeted with the hashtag #NewEraWithErdogan. A special one lira coin (less than 25 U.S. cents) was minted for guests with the image of the presidential palace, dated July 9, 2018.

The now defunct government of Prime Minister Binali Yildirim issued a last-minute decree revamping ministries to conform to the new executive presidency structure. Erdogan is expected to announce his Cabinet on Monday evening.

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Erdogan inaugurates Turkey's powerful executive presidency ...

Turkey on Wednesday issued a decree that transfers some powers to the president, as the country moves to an executive presidential system following President Tayyip Erdogan's win in last month's presidential and parliamentary elections.

The decree, issued in the government's official gazette, makes changes to laws dating from 1924 to 2017, removes references to the prime minister whose office has been abolished and replaces them with "president."

Read more:The impact of Turkey's election: Erdogan's sweeping new powers

The changes mean the president can

Read more:Could Turkey's opposition reset ties with the EU?

When the changes will come into effect: The changes in the latest decree will take effect when Erdogan takes the oath of office, which is expected to happen in parliament on July 8 or 9.

The new presidential system: In a constitutional referendum in April 2017, a slim majority of Turkish voters approved the presidential system. The constitutional change allowed the winner of the 2018presidential election to assume full control of the government.

Read more:Opinion: Recep Tayyip Erdogan wins, democracy loses

Term limits: The president is limited to two five-year presidential terms, but if the parliament calls early elections during the second term the president may run for a third term.

Erdogan's rise to power: Erdogan served as prime minister of Turkey, formerly the country's most powerful post,from 2003 until 2014. Plans to alter the system to place Turkey's meaningful political power in his new rolewere already in motion before his job swap in 2014; before the April 2017 referendum, the presidential role was largely ceremonial. Erdoganwas reelected president in snap presidential elections in June 2018, having called them more than a year ahead of schedule. That was the final hurdle to implementing his desired reforms, opposition candidates had pledged to repeal some or all of them if they had won.

On Wednesday, Turkey's state election commission announced its finalvote tally, in which President Erdogan won 52.59 percent of the vote, followed by opposition candidate Muharrem Ince of the CHP party with 30.64 percent and jailed pro-Kurdish candidate Selahattin Demirtas with 8.4 percent.

In Turkey and abroad, Recep Tayyip Erdogan has a polarizing effect. He has been described as a neo-Ottoman "sultan" as well as an authoritarian leader. From his early beginnings campaigning for Islamist causes to leading NATO's second largest military as the president of Turkey, DW explores the rise of the Turkish leader.

After years of moving up the ranks of the Islamist-rooted Welfare Party, Erdogan was elected mayor of Istanbul in 1994. But four years later, the party was ruled unconstitutional on the grounds it threatened Turkey's secularist nature, and was disbanded. He was later jailed for four months for a controversial public reading of a poem, and consequently lost his mayorship over the conviction.

Erdogan co-founded the Justice and Development Party (AKP), which won a majority of seats in 2002. He was made prime minister in 2003. During his first years in office, Erdogan worked on providing social services, improving the economy and implementing democratic reforms. But some have argued that his premiership was also marked by a religious shift in the political sphere.

While Turkey's constitution guarantees the country's secular nature, observers believe Erdogan has managed to purge the "old secularist guard." The Turkish leader has said that one of his goals is to raise a "pious generation." Erdogan's supporters have hailed the Turkish leader's initiatives, arguing that they've reversed years of discrimination against practicing Muslims.

In July 2016, a failed military coup targeting Erdogan and his government left more than 200 people dead, including civilians and soldiers. In the wake of the coup attempt, Erdogan declared a state of emergency and vowed to "clean up" the military. "In Turkey, armed forces are not governing the state or leading the state. They cannot," he said.

Since the failed coup, authorities have launched a nationwide crackdown, arresting more than 50,000 people in the armed forces, police, judiciary, schools and media. Erdogan has blamed Fethullah Gulen, a self-exiled cleric in the US and former ally, and his supporters of trying to undermine the government. But rights groups believe the allegations are a means to solidify his power and influence.

While Erdogan enjoys significant support in Turkey and the Turkish expatriate community, he has been criticized for his heavy-handed policies and military campaigns against Kurdish militants following the collapse of a peace process in 2015. This January, Erdogan launched a deadly offensive into the northern Syrian enclave of Afrin, an operation that was widely condemned by human rights groups.

Having served as Turkey's president since 2014, Erdogan successfully extended his time in office after winning elections in June. The elections marked Turkey's transition to an executive-style presidency. Observers believe the elections will herald a new era for Turkey for better or worse.

Author: Lewis Sanders IV

law/msh (AP, Reuters)

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