Turkish government’s tiny salary offer reveals hollow mortgage campaign promise

The Turkish government sat down at the negotiating table early in July with the country’s largest union confederation, Türk-İş, and with three public officials’ confederations last week to bargain for salary increases for hundreds of thousands of workers and nearly 4 million civil servants.

The talks ended in acrimony, with union leaders abandoning negotiations in protest at the government’s proposed 5 percent rise, equalling a net 60-lira ($10.75) raise to a monthly 3,000-lira ($537) salary.  

Another of Turkey’s big union confederations, KESK, stated its members’ demands – a 38 percent wage increase, plus insurance premiums and benefits.

Kamu-Sen, a confederation aligned with the junior member of the ruling coalition, the far-right Nationalist Movement Party (MHP), demanded a 10 percent wage increase plus holiday premiums and other benefits.

Even Memur-Sen, the public officials’ union aligned with the ruling Justice and Development Party (AKP), demanded an 8 percent rise.

There was already acrimony before the three confederations had sat down to talks on Aug. 1. Police used batons, tear gas and plastic bullets to step a protest by members of KESK at the Family, Work and Social Security Ministry and detained several people.

Once the negotiations had started on the same day, the government only increased its offer by 1 percent. The confederations reacted strongly, and the first round of talks ended with disagreement.

Civil servants have no to strike, so if they turn down the government’s pay offer, they must take their case to an arbitration court. The court’s decision is final and there is no right to appeal. Thus the civil servants’ negotiations will end by Aug. 31, either with an agreement with the government, or with the decision by the arbitration court.

The situation is much the same for public workers. They can call a strike, but it is within the president’s power to postpone it for 60 days citing health or security reasons. Once that 60-day period passes, if the workers do not accept the government’s terms, it can impose another 60-day delay.

In other words, public employees in Turkey, be they civil servants, contracted workers or subcontractors, have no remedy in sight for the real wage decrease resulting from years of high inflation.

While the workers are being offered a 5 percent increase after years when inflation has not dipped lower than 15 percent, President Recep Tayyip Erdoğan is employing his unorthodox method to tackle inflation – forcing the central bank to lower interest rates. Public banks have followed suit.

The state-owned Ziraat Bank, Vakıfbank and Halkbank have all started campaigns offering interest rate reductions on consumer loans and mortgages. Private banks, knowing that they are unable to replenish their losses from the Treasury, have so far been more cautious.

The three public banks have lowered monthly interest on mortgages from 1.45 percent to 0.99 percent, and have extended terms of loans of up to 500,000 liras from 120 months to 180 months.

The state-run Anadolu news agency, which was taken under the Turkish Presidency’s Communications Directorate in April, advertised the banks’ campaigns with a headline telling citizens they could “own a home as easily as paying rent”. 

The public banks have announced that, with contributions from government-linked housing sector contractors who trusted the government to keep them afloat and are now stuck with a large excess of housing stock, house buyers’ monthly interest payments can be as low as 0.79 percent.

The government ran the same campaign offering mortgage interest rates under 1 percent before the local elections on March 31, but failed to drum up much enthusiasm in the housing sector.

Public banks were also called on to reduce rates to 0.98 percent monthly before the June 24 national elections last year, again with little success. 

When Erdoğan was elected president in the elections, the first task of new Environment and Urban Planning Minister Murat Kurum was to declare a “national housing mobilisation” and renew the 0.98 percent interest rate offer in an effort to save contractors. Again, the drive did not catch on.

So now the public banks have yet again received word from the government that they must, at a loss, run another iteration of the same campaign that has failed to achieve its goal five times already.

The publicity campaign run by Anadolu gives examples of how you can become a homeowner – by withdrawing a 250,00-lira ($44,848) loan and repaying a total of 536,000 liras to the bank in 180 monthly instalments of 3,000 liras. Or, the agency told Turks, you could double those figures.

So, how then is the worker offered a 60-lira raise to her 3,000-lira salary, or the civil servant offered a 6 percent raise to his 4,000-lira salary, supposed to make use of this drive and become a homeowner “as easily as if they were paying rent”?

The government’s campaign has lost all its credibility and been exposed as a fantasy that when put to the test of reality would have the average worker spending his or her entire salary on mortgage repayments.

Private banks have not invested any time or effort in these campaigns because they can see they are hopeless from the start. Even if some of these banks bow to government pressure and join the campaign, it is only likely to be a facade, without risking much of the bank’s money.

Instead, there has been a lot of talk in banking circles about debtors taking advantage of the government-backed credit campaigns by taking out loans with interest-free periods and converting the cash to foreign currency. 

By using their properties or possessions as security on the loan, many of these debtors have made a tidy profit by simply not making loan repayments. By the time banks repossess the properties, Turkey’s struggling lira had been far outstripped by foreign currencies, with debtors pocketing the difference and the bank forced to try to sell their properties.

The important point here is that these campaigns run by public banks will benefit few besides those close to the government. 

The opinions expressed in this column are those of the author and do not necessarily reflect those of Ahval.