Erdogan says crash of lira 'political plot' against Turkey

  • Erdogan says crash of lira 'political plot' against Turkey

Erdogan says crash of lira 'political plot' against Turkey

Although Turkey's currency rose Tuesday, the war of words with the US that helped trigger the crisis continues.

Turkey's president appeared to escalate a dispute with the United States that has helped foment a Turkish currency crisis, claiming Tuesday that his country will boycott USA -made electronic goods. Also, a diplomatic spat with the USA is resulting in sharply higher tariffs on Turkish steel and aluminum.

Erdogan has not backed down over the rift with the U.S. and has used the ensuing crisis to his advantage by blaming it on a foreign conspiracy, telling party members in the city of Trabzon on Sunday: "The aim of the operation is to make Turkey surrender in all areas from finance to politics". Here's what Americans should know.

The Trump administration doubled tariffs on Turkish steel and aluminum last week and targeted Erdoğan's interior and justice ministers with financial sanctions two weeks ago over Ankara's detainment of an American pastor. Mr Brunson, who faces up to 35 years in jail if found guilty, denies the charges.

The currency has been steadily declining for the past year. Ultra-low interest rates in the US and Europe have for years encouraged companies in Turkey to borrow in foreign currencies.

Independent economists say it would be hard to unseat the dollar as the top reserve currency as it is used widely in the global economy, for example to trade in oil and for commercial deals.

About 15 per cent of QNB's assets and 13 per cent of its loans are linked to Turkey, according to Arqaam Capital.

None of this looks remotely sufficient to deal with the scale of the crisis, particularly given the paucity of Turkey's foreign currency and gold reserves - which are often used by central banks to fight off currency speculators.

The external funds entered the Turkish economy to finance deficits, massive government spending and company borrowing. If anything, the drop in the lira is making us a lot more money right now, so we're not anxious about it at all!”.

The Post Office said sales of lira in the past week were three times higher than a year ago.

A currency crisis blew up last week in the Turkish lira on investor concerns over Prime Minister Tayyip Erdogan's increasing control over the economy and deteriorating relationship with the United States.

Does this have effects outside Turkey? It also pledged to provide "all the liquidity banks need". BBVA is the second-largest private bank in Spain. He speaks of "economic war" and a "campaign" waged by external powers created to weaken Turkey.

The growing interconnectedness of the world economy means that the recent sharp decline in the value of the lira poses risks for other fragile emerging market economies, which in turn pose risks for the developed world.

'We (also) have our Venus and Vestel, ' he said about homegrown Turkish electronics brands. Other countries have much less exposure.

US and global markets fell on Friday and Monday, reflecting concerns that Turkey's problems could spread. By size, Turkey is America's 32nd-largest trading partner, and USA banks have little invested in Turkey, making up less than one percent of all foreign lending. "Even if all these claims were to be written off-they won't be-the impact on the US banking system would be minimal".

Turkey's stock market has also fallen 17 percent, while government borrowing costs have risen to 18 percent a year.