Erdogan says crash of lira 'political plot' against Turkey

Sean Reid
August 13, 2018

The lira then tumbled as much as 18 per cent at one point, its biggest daily drop since 2001.

Andrew Craig Brunson, an evangelical pastor from Black Mountain, North Carolina, arrives at his house in Izmir, Turkey, July 25, 2018.

US President Donald Trump has offered talks on a "more comprehensive deal" but Iran has baulked at negotiating under the pressure of sanctions and has instead leant on its increasingly close ties with fellow US sanctions targets Turkey and Russian Federation. Stocks dropped 4 per cent, with the BIST index of blue-chip stocks down around 50 per cent in dollar terms this year. Erdogan himself was elected prime minister in 2003 on the back of a major crisis two years earlier, but has traditionally always had Washington's staunch support. "Failure to reverse this trend of unilateralism and disrespect will require us to start looking for new friends and allies".

Trump has tweeted that he wants the pastor released.

A Turkish delegation visited Washington for talks this week but left with no signs of a breakthrough.


"Contagion risks centre on Spanish, Italian and French banks exposed to Turkish foreign currency debt, as well as Argentina and South Africa", warned analysts at ANZ. He has told citizens to swap their dollars for lira.

A dispute between North Atlantic Treaty Organisation allies Turkey and the United States - which reached new intensity over the detention of an American pastor - has hammered the lira and also raised questions over the future partnership between Washington and Ankara. The official said diplomacy on the issue continued. "The President's remarks reflected his administration's determination to maintain the strength of Turkey's economy and served as a warning against the potential outflow of foreign currencies", Altun said. "We should also expect Turkey to draw even closer to Iran".

The Turkish currency's slide comes amid rising tensions between the United States and President Recep Tayyip Erdogan over trade.

"The sinking Lira demonstrates the dangers that a rapidly depreciating currency could push the entire country into crisis mode, given companies in the real economy are sensitive to foreign exchange changes", said Ken Cheung Kin-tai, senior Asia FX strategist at Mizuho Bank. "We will be entering a strong period in terms of fiscal policies", he said.

Erdogan's comments on interest rates - and his recent appointment of his son-in-law as finance minister - have heightened perceptions that the central bank is not independent.


"This a plot to force Turkey to surrender in every field from finance to politics, to make Turkey and its people to kneel down".

Mr Erdogan ruled out the possibility of higher interest rates, which economists said are needed to stabilise the currency. "What is the reason for all this storm in a tea cup?" "There is no economic reason for the present (currency plunge) situation".

"Turkey is under siege in the economy, as in other areas", said Erdoğan in his address.

The fear is that Turkish firms that took out euro and dollar denominated loans will be unable to repay those debts as the lira collapses, triggering bankruptcies that hit Turkish banks.

"I am specifically addressing our manufacturers: Do not rush to the banks to buy dollars", he said. Do not take a stance saying "We are bankrupt, we are done, we should guarantee ourselves.' If you do that, that would be wrong".


Presidential Communications Director Fahrettin Altun described the rumors as "disinformation campaign" based on a statement by President Recep Tayyip Erdoğan, who had said on August 12 that "You must know that keeping this nation on its feet is not just our duty but also the duty of industrialists and merchants".

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