Turkey’s lira crisis threatens to undermine global economy

Umit Bektas  Reuters

Umit Bektas Reuters

Liberty Times that four major Taiwanese companies are likely to be on the losing end of investments and ventures in Turkey if the USA sanctions are implemented and maintained for any significant amount of time. But Sanders, at a Tuesday press briefing, declined to say how the US government plans to apply more pressure on Ankara, which repeatedly has ignored calls from Trump and others to free Christian pastor Andrew Brunson.

Turkey accuses Brunson of espionage and is holding him under house arrest pending his trial.

Relations between North Atlantic Treaty Organisation allies Turkey and the United States are at a low point, hurt by a series of issues from diverging interests in Syria, Ankara's plan to buy Russian defence systems and the detention of an American pastor, Andrew Brunson.

A bigger danger is that Turkey's crisis will spill over into other emerging market economies and there were signs on Monday that other countries seen as vulnerable were coming under speculative attack.

The tough message emerged a day after White House national security adviser John Bolton met privately with Turkish ambassador Serdar Kilic about the case of evangelical pastor Andrew Brunson.

The Turkish lira has nosedived in value in the past week over concerns about Erdogan's economic policies and after the US slapped sanctions on Turkey angered by the continued detention of an American pastor.

Turkey's President Recep Tayyip Erdogan gestures prior to delivering a speech in Ankara, Turkey, Tuesday, Aug. 14, 2018.

Turkish President Recep Tayyip Erdogan announced a boycott of American electronics Tuesday after US President Donald Trump's decision to hike tariffs on Turkish steel imports.

It's not clear from the speech quite what this boycott could entail - whether it's Erdogan encouraging people to buy non-American devices or whether this will be a full-on ban on imports.

The earlier rebound was pinned on local investors attempting to cash in on the lira slide by selling their dollars.

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Erdogan has called on Turks to exchange their dollars for lira in order to shore up the domestic currency.

Mr. Erdogan last week renewed a call for Turks to convert their dollars into the Turkish lira, to help underwite the currency's value.

The external funds entered the Turkish economy to finance deficits, massive government spending and company borrowing.

On Monday, Erdogan criticized his American counterpart, saying Washington was seeking to stab Turkey "in the back".

Policy makers need to adopt a series of measures "so that the situation doesn't make permanent damage to the real economy", the Union of Chambers and Commodities Exchanges of Turkey and the Turkish Industry and Business Association said in a joint statement.

The difference is that unlike Russian Federation, the US and Turkey are North Atlantic Treaty Organisation members. The Turkish lira is down 41% so far this year, with the South African rand down 13%.

The diplomatic dispute has sent shockwaves through financial markets across the world as the plunging lira causing currencies in other developing countries to nosedive.

"We view the policy of sanctions as unlawful and illegitimate, driven mostly by a desire to dominate everywhere and in everything, dictate policies and call shots in global affairs", Lavrov said.

The Turkish envoy conveyed the message the pressure and threats would only lead to a "chaos" in relations which could only improve after Washington abandons the language of "threats", Cavusoglu said.

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