Erdogan accuses ‘economic terrorists’ of plotting harm to Turkey
President Tayyip Erdogan on Monday accused “economic terrorists” of plotting to harm Turkey by spreading false reports and said they would face the full force of the law, as authorities launched investigations of those suspected of involvement.
Financial stocks felt the full blast of the currency crisis, with some bank stocks falling by over 10%.
The lira currency, which has lost more than 40 percent against the U.S. dollar this year, pulled back from a record low of 7.24 earlier on Monday after the central bank pledged to provide liquidity, but it remained under selling pressure and its meltdown continued to rattle global markets.
The Guardian’s Economic editor says that the direct impact of what looks like an inevitable recession in Turkey would be relatively small because, despite a population of 80 million and strong growth in recent years, the country accounts for only 1% of global GDP.
Eurozone countries run a trade surplus with Turkey but it is small.
In the two previous Turkish financial crises since the turn of the millennium, European exporters have been able to divert their business to other markets.
The European Central Bank has expressed concern about potential contagion through the eurozone banking system, with Spain, followed by Italy, the most heavily exposed countries.
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.
Turkey’s problems are particularly acute because it has more than $300bn of dollar-denominated corporate debt, which is getting more expensive to finance by the day. However, other countries – such as Mexico and South Africa – also took advantage of low US interest rates in the years after the financial crisis to borrow heavily in dollars and saw their currencies coming under pressure. The fear is of a full-blown emerging market crisis.
Some fear their businesses could shut down, while others who support the president say they will buy domestic products and shun goods from abroad. Those who cater to tourists, however, hope that the decline in the value of the currency will bring more foreign holidaymakers to the country.
Report based on Reuters / FT / The Guardian.