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Interview with Mehmet Şimşek, Deputy Prime Minister of Turkey, from the World Economic Forum 2017

Following are excerpts from a CNBC interview with Mehmet Şimşek, Deputy Prime Minister of Turkey, from the World Economic Forum 2017 with Hadley Gamble.

HG: your Excellency thank you so much for joining CNBC especially for braving the freezing cold. My first question to you is concerning the Lira. Are we in a currency crisis. What's your outlook. Are we facing major inflation in Turkey. What are your thoughts?

MS: Well thank you. I mean Lira has been under pressure. Largely affecting traumatic experiences of last year and terror attacks in Turkey. And of course there's also a structural current account deficit. But, it's quite likely that this is not going to last for longer, simply because policy response is in the making; the Central Bank has responded, and this is likely to continue to focus on that because while we don't have a target level for the Lira. We clearly you know we are concerned about the implications for inflation, price stability but also - the Turkish real sector has sort of fixed position; and we have to pay attention to all of that. But clearly, this also to do, as I said, with the uncertainty surrounding the Constitution amendments. They're likely to clear the parliament soon probably over the next day or two; and then we'll have the referendum process completed within two and a half months. And once we get clarity on this front I believe that Turkey will be back on track, because we do have a very strong reform agenda. And this constitutional amendment will provide visibility on the political front. And therefore we're not in a currency crisis. We're just experiencing some adjustment and that's not likely to cause permanent damage.

HG: What about the political situation in Turkey today. How concerned are you by the consistent amount of terror attacks over the last year. And are we going to see those continue.

MS: Well let's put it this way. Lack of functioning states in Syria and Iraq has provided a fertile ground for various terrorist organizations, including the barbaric DAESH and of course PKK and YPG. And Turkey has been subject to intense terrorist acts. But Turkey has recently took the matter into its own hands. We have now boots on the ground in Syria we pushed DAESH away from our border, now that's very important. We're building a wall along nine hundred eleven kilometers of Syrian border. Are much more effective in dealing with it. So chances are with cooperation with United States and Russia and other players. Daesh is issues likely to be contained. As you know it is under siege in Mosul, in Raqqah and al-Bab. And there is better cooperation between all key players – now, that's very important. Secondly there's going to be a summit in Astana. And all the key players are going to be there. So there's a real chance of the current temporary truce turning into a more permanent arrangement. Why? Because Russia has a significant sway, you know, I mean influence on Syria. Iran similarly. And Turkey is an important player when it comes to moderate opposition. So therefore all the critical players are going to be at the table possibly including United States and that could really provide a real chance of actually you know putting an end to this human tragedy. It's also been. A source of terror. On top of that, as I said. You know we've had that Coup attempt, that failed Coup attempt; we're largely done with the process of you know essentially removing all those remnants of this religious cult. I think these constitutional amendments would also provide clarity. In terms of stability in the administration, in terms of fairness in representation. So this is an important reform, and as I said, once we are through these hurdles. We're mending fences with mending fences with Russia. We're back on good terms. With mending fences with Israel. Prime Minister was recently in Iraq and we have, you know again good relations. So I think Turkey both in terms of Geopolitics and also internally I think is in a much better shape, so people within the recent past and extrapolate that into future, of course would be concerned. But if they can see that actually the worst is behind us. And actually we are set to, you know move forward, then I think is a whole different story. And Turkey still has a good story.

HG: Talk to me a little bit more about those with foreign relationships. You mentioned Russia and how that relationship is really mended. What about the relationship with the United States? What's your outlook for what's going to happen over the next several months? Because we have Rex Tillerson coming in as secretary of state. We have President elect Donald Trump soon to be the president of the United States and as a NATO member Turkey can't really afford to have any problems with the United States can they?

MS: Well we don't want to have any problems with the United States . The United States are our ally. We've been together. United States needs Turkey. Turkey needs United States. It is in the interest of not only the region, but the West in general. And globally in general to have turkey us on good terms.

HG: So you wouldn't say that the United States is irrelevant when it comes to what's happening in Syria.

MS: No no no no. Exactly the opposite the United States is relevant. There are two issues that have poisoned the air, or strained relations. One is: This guy who thinks he is some sort of messiah. The head of this religious cult. Is not in a third world country. He doesn't live on an island and he and his network actually live and operate out of Pennsylvania in the United States. That's a source of contention. That needs to be addressed. We have provided U.S. justice department with half a million pieces of evidence linking that network to the failed coup attempt. That's first. Trump administration has hinted that they might be cooperating on this issue, this is very important. Secondly. We also have disagreements on PYD YPG. Everybody knows, including United States , that PYD YPG is an extension of PKK. PKK has been on terror lists of United States, European Union and the UN. So what are we telling our American friends – we say look, do you need help to combat Daesh? We're happy to help you. But you cannot use one terror organisation against the other. We've even given them examples. Right is a branch of al-Qaeda

HG INTERRUPTS: So are you saying you're going to help in the fight against Daesh unless…

MS: No, we offered help. But what we're saying is

HG: But it's in your interest to fight them as well, obviously.

MS: Well of course, we are already fighting Daesh. We want to help the United States fight Daesh as well. All we're saying is that you cannot use one terrorist group, and simply say, oh, 'these are more better guys, good guys because they're combatting another terrorist group because al-Nusra is a branch of al Qaeda and is combating Daesh. It doesn't make al Nusra less of a terrorist organization. That's what we are telling our American friends.

HG: And so in terms of President elect Trump. How would you describe ypour outlook for that relationship? Are we going to see a rapprochement. How are we going to see serious collaboration in the fight against the Islamic State?

MS: exactly, we are ready to help, cooperate, to work together to fight terrorism and extremism wherever it is with the United States. No question about it, we look forward to more constructive and more productive relationship. With Trump.

HG: And in terms of the investment case for Turkey we talked about the Lira. We talked about the volatility that we've seen over the last year. Investors are hesitant to put their money in Turkey today what would be the message.

MS: The message is simple, straight forward: Fundamentals have not changed. Turkey is still one of the very few emerging markets, with a population of more than 80 million people with a per capita GDP more than $10,000. This makes Turkey a sizable, half a dozen, emerging markets. Secondly right now geography seems like a liability. You know we live in a rough neighborhood. That's not going to last forever. A couple of years down the road we might be talking about reconstruction of Libya. Yemen, Syria. Iraq. And that's where Turkey comes in. Thirdly; Turkey has a very strong entrepreneurship culture, we have a very dynamic private sector. Valuations are exceedingly attractive. Right now there's a lot of dust in the air. It's not going to last forever. Finally. The Turkey story is largely built on good policies and good politics. We've had a few traumatic experiences but they're behind. We have a very strong reform program. We have a strong road map and we are going to strongly implement it as soon as this referendum is out of the way which is likely by mid- April. So the story is a combination of; favorable demographics strong long term outlook reforms and stability and hopefully that regional factors.

HG: And finally can you really see a resolution to the conflict in Syria without the United States involvement?

MS: We want the United States to be at the table. We want them to be involved. No question we've invited them.

HG: Your Excellency thank you for joining us. Pleasure.