ANKARA (Reuters) - President Tayyip Erdogan appointed his son-in-law as Turkey’s finance minister on Monday hours after he was sworn in with sweeping new executive powers, promising a “strong government and a strong Turkey”.

The lira TRYTOM=D3, which has lost nearly a fifth of its value against the dollar this year, dropped nearly 3 percent to 4.74 to the U.S. currency after the cabinet announcement.

Erdogan named his son-in-law Berat Albayrak as treasury and finance minister in an updated cabinet that excluded former deputy prime minister Mehmet Simsek, seen as the main market-friendly minister in the previous government.

The lira has been battered by concern about Erdogan’s drive for lower interest rates and by comments in May that he planned to take greater control of the economy after the election, which he won on June 24.

Assuming the new executive presidency he has long fought to establish, Erdogan earlier took the oath of office in parliament before addressing international leaders gathered at the presidential palace in Ankara.

“We, as Turkey and as the Turkish people, are making a new start here today,” he told the dignitaries and thousands of guests. “We are leaving behind the system that has in the past cost our country a heavy price in political and economic chaos.”

Erdogan named Fuat Oktay, a former Turkish Airlines executive who studied in the United States, as vice president. Armed forces chief of staff Hulusi Akar was named defense minister. Foreign Minister Mevlut Cavusoglu remained in his post.

Erdogan, 64, says a powerful executive presidency is vital to drive economic growth, ensure security after a failed 2016 military coup and safeguard Turkey from war across its southern border in Syria and Iraq.

“We are embarking on this road by using this opportunity as best we can for a strong parliament, strong government and strong Turkey,” he said.

‘INSTITUTIONALIZED AUTOCRACY’

The introduction of the new presidential system is the biggest overhaul of governance since the Turkish republic was established on the ruins of the Ottoman Empire nearly a century ago.

The post of prime minister has been scrapped and the president will be able to select a cabinet, regulate ministries and remove civil servants, all without parliamentary approval.

Erdogan’s supporters see the changes as just reward for a leader who has put Islamic values at the core of public life, championed the pious working classes and overseen years of strong economic growth.

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Opponents say the move marks a lurch to authoritarianism, accusing Erdogan of eroding the secular institutions set up by modern Turkey’s founder, Mustafa Kemal Ataturk, and driving it further from Western values of democracy and free speech.

Marc Pierini, a former EU ambassador to Turkey and visiting scholar at Carnegie Europe, said Erdogan’s new powers effectively make him a “super-executive president”.

“Most powers will be concentrated in his hands, there will no longer be a prime minister, and almost none of the checks and balances of liberal democracies will be present. In other words, Turkey will be an institutionalized autocracy.”

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NO WESTERN LEADERS

State news agency Anadolu said Erdogan’s inauguration celebration was attended by Venezuelan President Nicolas Maduro, Russian Prime Minister Dmitry Medvedev and Sudanese President Omar Hassan al-Bashir, wanted for war crimes by the International Criminal Court.

No major Western leader featured on a list of 50 presidents, prime ministers and other high-ranking guests.

Turkey is a member of the Western military alliance, NATO, but it has been at odds with the United States over military strategy in Syria and with the European Union over Ankara’s purges of state institutions, armed forces, police and media following the failed coup.

There are 16 ministers in Erdogan’s streamlined new cabinet, which Erdogan has said will be more efficient and act faster.

The new government faces immediate economic challenges. Inflation surged last month above 15 percent, its highest level in more than a decade, even though the central bank has raised interest rates by 5 percentage points since April.

Turkey also faces a widening current account deficit making it reliant on weak foreign investment to plug the gap.

Earlier on Monday the lira briefly dropped more than 1 percent after a decree removed a clause stipulating a five-year term for the central bank governor.

Scrapping the term would remove a shield that helps ensure the bank’s independence from politicians, former central banker Ugur Gurses said. A senior adviser to Erdogan later said that governors would still be appointed for a five-year term.