Economics

Turkey’s bid for BRICS both strategic and symbolic step, analysts say

Published

5 months ago

September 10, 2024

Turkish Foreign Minister Hakan Fidan attends the BRICS+ session on a two-day BRICS foreign ministers summit held in Nizhny Novgorod, Russia on June 11, 2024.

Sefa Karacan | Anadolu | Getty Images

Turkey’s request to join the BRICS alliance is a move seen as both strategic and symbolic as the Eurasian country of 85 million makes increasing strides in its influence and leverage on the global stage.

“Our president has already expressed multiple times that we wish to become a member of BRICS,” a spokesperson for Turkey’s leading AK Party told journalists earlier in September. “Our request in this matter is clear, and the process is proceeding within this framework.”

BRICS, which stands for Brazil, Russia, India, China and South Africa, is a group of emerging market countries that seek to deepen their economic ties. This year, it gained four new members: Iran, Egypt, Ethiopia, and the UAE.

It’s also seen as a counterweight to Western-led organizations like the EU, the G7 and even NATO, although it lacks formal structure, enforcement mechanisms, and uniform rules and standards.

Tanto Capital Partners discusses Turkey's BRICS bid

For Turkey, a longtime Western ally and NATO member since 1952, the move to join BRICS is “in line with its broader geopolitical journey: positioning itself as an independent actor in a multi-polar world and even becoming a pole of power in its own right,” George Dyson, a senior analyst at Control Risks, told CNBC.

“This is not to say that Turkey is turning away from the West entirely,” Dyson added, “but Turkey wants to foster as many trading ties as possible and pursue opportunities unilaterally without being constrained by Western alignment. It is definitely symbolic in that Turkey is demonstrating exactly this — that it is not constrained by its good ties with the West.”

Diversifying alliances

Despite decades of being aligned with Europe and the U.S., Turkey has faced consistent rejection from joining the EU, which has long been a sore spot for Ankara.

Ambassador Matthew Bryza, a former White House and Senior State Department official currently based in Istanbul, said that Turkish President Recep Tayyip Erdogan and his government “seem to be motivated mostly by two factors: A strategic tradition of securing national interests… and a desire to spook the West a bit, both out of emotional spite and as a negotiating tactic to extract concessions.”

CNBC has contacted the Turkish presidency’s office for comment.

Turkey has in the last few years expanded its role in global diplomacy, brokering prisoner swap deals and leading other negotiations between Ukraine and Russia, for instance, while also mending previously strained relations with regional powers like Saudi Arabia, the United Arab Emirates and most recently, Egypt.

Russian President Vladimir Putin shakes hands with Turkish President Recep Tayyip Erdogan during their joint press conference on September 4, 2023, in Sochi, Russia.

Getty Images News | Getty Images

Ankara also refuses to partake in sanctions against Russia — a stance that irks its Western allies but helps it maintain an independent position as a so-called “middle power,” which it sees as beneficial to its relationships with China and the Global South.

To that end, “any new BRICS member is obviously eager to take advantage of stronger ‘togetherness’ of emerging economies in order to reduce dependency on developed economies, mainly the United States,” said Arda Tunca, an independent economist and consultant based in Turkey.

Standing up to the West?

Tunca noted, however, that Turkey’s unique position in the world is a “delicate discussion point” as the country has “serious political problems with the EU and the United States” despite its western alliances.

Turkey’s governing party, which has run the country for 22 years, is “ideologically closer to the East than the West,” Tunca said. “Turkey wanted to hop on the BRICS train before it was late. It is too early to mention that the BRICS can become an alternative to the West, but the intention is clearly to stand up against the West under the leadership of China.”

Importantly, being part of BRICS allows its members to trade in currencies other than dollars. This aims to reduce dependency on the U.S.-led system and usher in a more multi-polar world. The fact that it’s led by China makes some in the West wary, who see this as a potential win for Beijing.

Turkish President Recep Tayyip Erdogan (not seen) is welcomed by Chinese President Xi Jinping as part of the 11th G20 Leaders’ Summit in Hangzhou, China, on September 3, 2016.

Mehmet Ali Ozcan | Anadolu Agency | Getty Images

“I don’t think there is any enforcement of their [BRICS’] decisions, it’s more of a geopolitical thing, sort of a symbolic counter to the G7,” Dyson said. He also noted: “It’s interesting that Iran and UAE are both in it. It’s a bit like the anti-West team.”

Erdogan has spoken of his desire to join BRICS since at least 2018, but the issue was never formalized. In June, Turkish Foreign Minister Hakan Fidan visited both China and Russia, the latter for a BRICS+ summit, during which Russian President Vladimir Putin said he “welcomed” Turkey’s interest in joining the bloc.

At the time, the then-U.S. ambassador to Turkey, Jeff Flake, said in an interview that he hoped Turkey wouldn’t join the group, but added that he did not think it would negatively impact Turkey’s alignment with the West.

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Germany’s election will usher in new leadership — but might not change its economy

Published

16 hours ago

February 21, 2025

Business Finance News

Production at the VW plant in Emden.

Sina Schuldt | Picture Alliance | Getty Images

The struggling German economy has been a major talking point among critics of Chancellor Olaf Scholz’ government during the latest election campaign — but analysts warn a new leadership might not turn these tides.

As voters prepare to head to the polls, it is now all but certain that Germany will soon have a new chancellor. The Christian Democratic Union’s Friedrich Merz is the firm favorite.

Merz has not shied away from blasting Scholz’s economic policies and from linking them to the lackluster state of Europe’s largest economy. He argues that a government under his leadership would give the economy the boost it needs.

Experts speaking to CNBC were less sure.

“There is a high risk that Germany will get a refurbished economic model after the elections, but not a brand new model that makes the competition jealous,” Carsten Brzeski, global head of macro at ING, told CNBC.

The CDU/CSU economic agenda

The CDU, which on a federal level ties up with regional sister party the Christian Social Union, is running on a “typical economic conservative program,” Brzeski said.

It includes income and corporate tax cuts, fewer subsidies and less bureaucracy, changes to social benefits, deregulation, support for innovation, start-ups and artificial intelligence and boosting investment among other policies, according to CDU/CSU campaigners.

“The weak parts of the positions are that the CDU/CSU is not very precise on how it wants to increase investments in infrastructure, digitalization and education. The intention is there, but the details are not,” Brzeski said, noting that the union appears to be aiming to revive Germany’s economic model without fully overhauling it.

“It is still a reform program which pretends that change can happen without pain,” he said.

Geraldine Dany-Knedlik, head of forecasting at research institute DIW Berlin, noted that the CDU is also looking to reach gross domestic product growth of around 2% again through its fiscal and economic program called “Agenda 2030.”

But reaching such levels of economic expansion in Germany “seems unrealistic,” not just temporarily, but also in the long run, she told CNBC.

Germany’s GDP declined in both 2023 and 2024. Recent quarterly growth readings have also been teetering on the verge of a technical recession, which has so far been narrowly avoided. The German economy shrank by 0.2% in the fourth quarter, compared with the previous three-month stretch, according to the latest reading.

Europe’s largest economy faces pressure in key industries like the auto sector, issues with infrastructure like the country’s rail network and a housebuilding crisis.

Dany-Knedlik also flagged the so-called debt brake, a long-standing fiscal rule that is enshrined in Germany’s constitution, which limits the size of the structural budget deficit and how much debt the government can take on.

Whether or not the clause should be overhauled has been a big part of the fiscal debate ahead of the election. While the CDU ideally does not want to change the debt brake, Merz has said that he may be open to some reform.

“To increase growth prospects substantially without increasing debt also seems rather unlikely,” DIW’s Dany-Knedlik said, adding that, if public investments were to rise within the limits of the debt brake, significant tax increases would be unavoidable.

“Taking into account that a 2 Percent growth target is to be reached within a 4 year legislation period, the Agenda 2030 in combination with conservatives attitude towards the debt break to me reads more of a wish list than a straight forward economic growth program,” she said.

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Franziska Palmas, senior Europe economist at Capital Economics, sees some benefits to the plans of the CDU-CSU union, saying they would likely “be positive” for the economy, but warning that the resulting boost would be small.

“Tax cuts would support consumer spending and private investment, but weak sentiment means consumers may save a significant share of their additional after-tax income and firms may be reluctant to invest,” she told CNBC.

Palmas nevertheless pointed out that not everyone would come away a winner from the new policies. Income tax cuts would benefit middle- and higher-income households more than those with a lower income, who would also be affected by potential reductions of social benefits.

Coalition talks ahead

Following the Sunday election, the CDU/CSU will almost certainly be left to find a coalition partner to form a majority government, with the Social Democratic Party or the Green party emerging as the likeliest candidates.

The parties will need to broker a coalition agreement outlining their joint goals, including on the economy — which could prove to be a difficult undertaking, Capital Economics’ Palmas said.

“The CDU and the SPD and Greens have significantly different economic policy positions,” she said, pointing to discrepancies over taxes and regulation. While the CDU/CSU want to reduce both items, the SPD and Greens seek to raise taxes and oppose deregulation in at least some areas, Palmas explained.

The group is nevertheless likely to hold the power in any potential negotiations as it will likely have their choice between partnering with the SPD or Greens.

“Accordingly, we suspect that the coalition agreement will include most of the CDU’s main economic proposals,” she said.